More Street Protests Rock U.S. Cities, Adding Uncertainty to Economy’s Reopening

June 1, 2020

It’s been an up-day for equities in Asia and Europe, but that trend may not extend to the United States where several cities (including NY, Chicago, Seattle, L.A., Atlanta and Philadelphia) experienced continuing racial protests with violence on Sunday.

U.S.-Sino tensions remain very elevated. In lifting Hong Kong’s special trade status and threatening actions against some Chinese companies, President stopped short of raising tariffs on that country. Share prices in response rallied 3.4% in Hong Kong, 2.7% in India, 2.2% to an 11-week high in China, 1.8% in South Korea, 1.6% in Singapore, 1.3% in Taiwan, and 1.2% in Malaysia. Stocks also have climbed 1.1% in Australia and show gains of 1.7% in Spain, 1.2% in the U.K. and France and 1.0% in Italy. But U.S. stock futures have been mixed.

The trade-weighted dollar touched an 11-week low. Dollar looses overnight amount to 1.1% against the Australian dollar, 0.4% relative to the loonie, 0.3% versus the kiwi, 0.2% against sterling, and 0.1% vis-a-vis the yen, Swiss franc and peso. The dollar is steady against the yuan and euro.

Prices for WTI crude oil and Comex gold are down 0.1% and 0.6%.

Ten-year German bund, British gilt, and Japanese JGB yields firmed 3, 2, and 1 basis points. The U.S. 10-year Treasury futures yield, in contrast, is down a basis point.

Economic news today is dominated by the release of May manufacturing purchasing managers surveys.

Japan’s manufacturing PMI fell another 3.5 points to a 134-month low of 38.4. On a brighter note, Japanese officials estimate that business capital investment last quarter was 4.3% higher than a year earlier, reversing a 3.5% on-year drop in the final quarter of 2010.

Euroland’s manufacturing purchasing managers index rebounded to a 2-month high of 39.4 in May from April’s record low of 33.4. Still that constitutes the second fastest rate of contraction in this 23-year-long data series.

Italy topped Euroland’s factory PMI leader board in May with a much greater-than-forecast 3-month high of 45.4 after April’s record low of 35.1. The PMI scores of Greece (41.1), France (40.6), Austria (40.9), Spain (38.3) and Germany (36.6) all represent 2-month highs. These surveys also reveal considerable disinflation and sub-50 readings for jobs, demand, and business confidence, which connote deteriorating trends.

The British manufacturing purchasing managers index also bounced up to a 2-month high, printing 8.1 points higher than in April at 40.7.

China‘s Caixin-compiled manufacturing PMI score of 50.7 beat analyst expectations after April saw a setback to 49.4 after 50.1 in March and 40.3 in February.  However, China’s order backlog sub-index sank to a 51-month low. The government-compiled manufacturing and non-manufacturing Chinese PMIs also were reported today. Manufacturing slid back 0.2 index points to 50.6, but was well above February’s low-point of 35.2. Non-manufacturing rose 0.4 points to a 4-month high of 53.6. It had bottomed in February at 29.6.

Taiwan‘s manufacturing purchasing managers index fell 0.3 points to a 136-month low of 41.9 in May. PMI readings in Malaysia of 45.6, Vietnam of 42.7, Thailand of 41.6, and India of 30.8 were each at two-month highs, but India’s result was particularly disappointing set against street forecasts that had been much higher than the actual figure. The Filipino PMI rose 8.5% from April’s record low to a 3-month high of 40.1, whereas South Korea’s PMI fell another 0.3 points to 41.3, signaling the fastest rate of contraction since the start of 2009.

Among other released European purchasing managers indices, Turkey’s manufacturing PMI recovered 2.5 index points to a 2-month high of 40.9. Russia‘s PMI of 36.2 was up from 31.3 scored in April and at a 2-month high. Note that any PMI reading below 50 means that conditions were worsening (a higher but still sub-50 result merely signifies a slower rate of deterioration). The Polish, Czech, and Swedish PMI’s rose to 2-month highs of 40.6, 39.6, and 39.2.

Australia’s CBA-compiled manufacturing PMI ticked 0.1 point lower to 44.0 in May, a new low for the move, but the AIG-compiled Australian manufacturing PMI rose 5.8 points on month to a 2-month high of 41.6. Brazil’s manufacturing sector continued to contract rapidly last month, as attested by a PMI reading of 38.3 versus 36.0 in April and 48.4 in March. South Africa’s ABSA-compiled manufacturing PMI improved 4.1 points in May to a 1-year high of 50.2.

Many countries are observing holidays today. Pentecost is being observed in Germany, Belgium, Denmark, Norway, Hungary and Switzerland. It’s the Queen’s Birthday holiday in New Zealand, and Pancasila Day in Indonesia. Ireland has a bank holiday.

In other data reported today,

South Korea’s combined January-May trade surplus of $8.51 billion was 42% narrower than a year earlier. For just May, both exports and imports were 20% lower than a year earlier.

Business confidence in Thailand remained very depressed in May at 34.4, albeit not quite so much as April’s nadir of 32.6. Confidence back in January had printed at 48.5.

Mexican manufacturing confidence fell 1.8 index points further to a 135-month low of 35.2 in May.

Hong Kong retail sales volume in April was 37.5% below its year earlier level. That’s the smallest on-year drop in three months but the fifteenth straight month to show a negative change. In Thailand, retail sales were 20.5% weaker than a year earlier in May versus a dip of just 1.0% seen in February.

Portuguese industrial production posted record drops of 18.2% on month and 25.9% on year in April.

A 0.6% quarterly slide in Serbian real GDP last quarter sliced the on-year growth rate to 5.0% from 6.2% in the final quarter of 2019, but such compared favorably with 2.6% on-year growth in the first quarter of 2019.

Scheduled U.S. releases today include the manufacturing purchasing managers survey and monthly construction spending.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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