June PMIs and Quarterly Japanese Tankan Survey Results Reported

July 1, 2014

The start of the third calendar quarter finds the dollar unchanged overnight against the euro, Swissie, loonie and kiwi, up 0.2% relative to the yen but down 0.2% versus the Aussie dollar and 0.1% vis-a-vis sterling.

There’s been a big protest march in Hong Kong on the seventeenth anniversary of its return to Chinese rule.  Protestors want greater political autonomy to manage their own affairs.

Canada will be closed for Canada Day.

Japan’s Nikkei climbed 1.1%.  The Bank of Japan released its quarterly Tankan survey of corporate conditions and expectations.  The major revelation was a greater-than-anticipated upward revision of planned investment spending in fiscal 2014 to 7.4% among all large firms and 1.7% for all firms.  Business conditions weakened in 2Q following Japan’s sales tax hike on April 1, but the slide is not expected to continue in the third quarter. 

Japanese motor vehicle sales recorded a third consecutive on-year decline in June, but the drop of 0.7% was much less than that of 5.6% in May.  Japan’s manufacturing purchasing managers index recovered to 51.5 in June, a 3-month high, from an upwardly revised 51.1 in May and and 49.4 in April.

Elsewhere in the Pacific Rim, share prices are up 0.5% in Taiwan and 0.4% in India, down 0.4% in Australia and Singapore and unchanged in China.  In Europe, equities have risen by 0.7% in France and Italy, 0.6% in Britiain, and 0.3% in Spain, Switzerland and Germany.

The ten-year British gilt yield is four basis points higher.  The German bund yield edge up a basis point, while its Japanese counterpart slid by a basis point.

WTI oil fell 0.4% to $105.81 per barrel.  Comex oil climbed 0.4% to $1,327.50 per ounce.

The number of German unemployed workers rose 9K in June on top of a 25K increase in May.  However, the jobless rate remained steady at 5.1% on an ILO basis and 6.7% in the national statistics.  Employment was 0.9% higher than a year before in May.

Italian unemployment advanced 0.1 percentage point to 12.6% in May.

Euroland’s 11.6% jobless rate in May was the same as in April and compares to 12.0% in May 2013.

The Reserve Bank of Australia as expected retained a record low 2.5% Official Cash Rate.  It has been at that level since a 25-basis point cut in August 2013.  Officials defended their accommodative stance, projecting in-target 1-2% inflation over the coming two years even if the Aussie dollar depreciates as it should.

Numerous purchasing manager surveys for manufacturing were published on this first business day of the month and quarter.

  • The Australian PMI reflected a faster rate of contraction, dipping to a 2-month low of 48.9 in June from 49.2 in May.  Readings below the 50 neutral level have been recorded since last November.
  • In China’s case, the government-authorized PMI rose to a six-month high of 51.0 from 50.8, and the HSBC PMI was revised to 50.7 from 50.8 reported initially.  The May reading was also 50.8, but the previous four readings had been lower than 50.
  • Turkey’s manufacturing PMI sank to a 34-month low of 48.8 from 50.1.
  • India’s PMI edged up to 51.5 from 51.4.  Indonesia’s index also edged slightly higher, printing at 52.7 in June after 52.4 in May.
  • Taiwan’s PMI of 54.0 after 52.4 reflected a faster pace of expansion in manufacturing last month.
  • But Vietnam’s PMI settled back to a 3-month low of 52.3, and South Africa’s 46.6 was the third sub-50 reading in a row and below 47.9 in May.
  • South Korea’s index dropped to 48.4 from 49.5.
  • Euroland’s PMI fell 0.4 points to a seven-month low of 51.8 in June and was also 0.1 point lower than its preliminary estimate.  Although revised higher, the French reading of 48.2 was at a six-month low, signifying deepening contraction.  The Dutch and Austrian scores of 52.3 and 50.4 were at 11-month lows.  Greece’s 49.4 was a seven-month low.  The German 52.0 reading and the Italian 52.6 score were at 8- and 3-month lows.  However, Spain shot a 54.6, which constitutes an 84-month high, and Ireland’s 55.3 was a 2-month peak.
  • The British purchasing managers index for manufacturing increased unexpectedly despite a rising pound to a 7-month high of 57.5.
  • Sweden’s 54.8 was better than forecast and above the May reading of 54.1.  Norway’s PMI was below 50 for a second straight time and at 49.6, same as in May.  The Danish index plunged to 50.3 from 59.7.  Such had been above 60 in April and March.
  • Likewise, a 1.5-point rise in the Swiss PMI to 54.0 exceeded expectations.
  • In Eastern Europe, Russia’s 49.1 was the eighth straight sub-50 reading but better than a score of 48.9 in May.  Poland’s 50.3 reading was down by 0.5 of a point and conveys stagnation.  The Czech PMI slid to a 6-month low of 54.7, but Czech GDP growth in the first quarter was revised upward to 0.8% from 0.4% and was associated with a 2.9% on-year rate of growth.  Hungary’s PMI dropped by 2.3 points to 51.5. 

U.S. data releases today are the IBD/TIPP optimism index, motor vehicle sales, construction spending, the manufacturing PMI and weekly chain store sales.  Romania is holding an interest rate policy meeting.

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

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