Steady Dollar, Lower Share Prices

June 4, 2014

The dollar firmed 0.2% overnight against the Canadian and New Zealand dollars and 0.1% relative to the yen, euro and sterling.  The U.S. currency is unchanged against the Swiss franc and Chinese yuan and down 0.1% relative to the Aussie dollar.

Share prices fell 1.0% in China, 0.6% in Australia and Hong Kong, 0.5% in Singapore and 0.2% in Indonesia and India.  Exceptions to the downtrend were upticks of 0.3% in the South Korean Kospi and 0.2% in Japan’s Nikkei.  In Europe, equities have slipped by 0.8% in Italy, 0.6% in Spain, 0.5% in France, and 0.2% in Germany and Britain.

The 10-year British gilt and Japanese JGB yields are up two and one basis points.  The German bund is steady.

West Texas Intermediate oil fell 0.7% to $103.35 per barrel.  Gold is 0.1% firmer at $1,245.90 per ounce.

The second estimate of euro area national income accounts left first-quarter GDP growth unchanged from the preliminary estimate of 0.2% against 4Q13 and 0.9% from a year earlier.  Quarter-over-quarter changes of 0.3% in business investment and government spending both surpassed expectations, and a 0.1% rise in personal consumption matched street forecasts.  A 0.2 percentage point drag from net foreign demand was offset with a similar positive contribution from inventories.  Growth in the year between 1Q13 and 1Q14 ranging from 2.3% in Germany to 1.2% in Belgium and Portugal, 1.0% in Austria, 0.8% in France, and 0.5% in Spain.  Greece and Finland experienced GDP contractions of 1.1% and 0.8%.  Italian and Dutch GDP each fell by 0.5% in the year.

The Ezone producer price report for April reinforced concern about a near-brush with deflation.  The PPI posted a fourth straight monthly decline and was 1.2% below its year earlier level.  Energy PPI deflation amounted to 3.3%, while all other producer prices were collectively 0.3% below their year-earlier level.

Australian GDP growth accelerated to a quarterly gain of 1.1% in the first quarter from 0.8% in 4Q13 and 0.6% in 3Q13.  GDP rose 3.5% on year, up from 2.7% in 4Q13 and 2.3% in 3Q13.  Between the final quarter of 2013 and the first quarter of 2014, personal consumption increased 0.5%, but Australia’s terms of trade (export/import price ratio) fell by 1.2%. 

Several more purchasing manager surveys were published, mostly dealing with service sector activity.

Euroland’s services PMI edged up to a 35-month high of 53.2 in May from 53.1 in April.  The composite purchasing managers index slid back to a 2-month low of 53.5, still good enough to suggest second-quarter GDP growth of some 0.4-0.5%.  The German services PMI also hit a 35-month high, while the composite German index of 55.6 implies 2Q growth of around 0.7%.  Spain’s composite and services PMI readings in May of 55.6 and 55.7 point to economic growth this quarter of perhaps 0.8% and the fastest expansion of private-sector employment in 17 years.  Italy’s composite and service-sector scores, respectively 55.6 and 51.6, represent 3-month peaks and imply growth this quarter of about 0.3%.  France is the biggest disappointment, with 3-month lows of 49.1 in services and 49.3 overall.  The data show a squeeze on profit margins and seem to confirm that low inflation is sapping regional growth.

The British services purchasing managers index edged down 0.1 to 58.6, suggest GDP growth near 0.8%, and point to the fastest jobs growth since 1997.

Another solid PMI was reported for Sweden.  There the services PMI confirmed accelerating expansion with a reading of 58.5 after 57.8 in April and 53.6 in March.

But Russia’s services and composite PMIs fell by 0.7 and 0.5 points to 46.1 and 47.1.  The former implies the fastest contraction since May 2009.  The latter represents a 5-month low.

Japan’s economy was more stable in May than April.  The services PMI printed at 49.3 after 46.4 in April and 52.1 in March.  The composite index recovered to a two-month high as well, rising to 49.2 from 46.3 in April and 52.8 in March.

India’s service-sector PMI of 50.2 was up from 48.5 in April and 47.5 in March and led by improved orders.  The composite Indian PMI of 50.7 followed 49.5 in April and 48.9 in March.  Both May readings were the best scores since June 2013.

South Africa’s HSBC-compiled private purchasing managers index bounced up to 49.7 in May from a 10-month low of 49.4 in April.  Being below 50, however, conveys a contracting trend.

The Lebanese private PMI was at a 2-month low of 48.0, the 11th sub-50 reading in a row.

Shop prices in Great Britain were 1.4% lower than a year earlier in May.

China’s index of leading economic indicators went up 0.5% in April.

Romanian, Czech and Hungarian GDP between 1Q13 and 1Q14 respectively climbed by 3.8%, 2.5%, and 3.5%.

Swedish industrial output rebounded from a 3.6% monthly slide in March with a 3.0% rise in April but still was 0.7% weaker in February-April than in November-January.  Swedish retail sales volume in April went up 0.6% on month and 6.7% on year.  Irish industrial production soared 11.9% between March 2013 and a year later.

The U.S. has a crowded data release calendar: the ADP estimate of private jobs growth, the non-manufacturing purchasing managers index, the trade deficit, quarterly productivity and unit labor costs, and the Beige Book.  Canada also releases its trade figures.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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