Election Surprise in Spain, Weak PMI Data, and Looking Ahead to This Week’s Monetary Policy Announcements and Many Corporate Earnings Reports
July 24, 2023
Based on late May local election results and opinion polls, Spain’s center-right parties were expected to return to power at the national level. A Socialist-led coalition headed by Pedro Sanchez had ruled since mid-2018 captured only 122 seats, falling short of the 176-seat threshold to command a parliamentary majority. However, due largely to a seat drop to 33 won by the far-right VOX Party, the center-right’s total of 169 seats also fell short of a majority. This ushers in a period of considerable political uncertainty in Euroland’s fourth largest economy.
Preliminary purchasing manager survey results for July for Euroland, Germany, France, Great Britain, and Australia fell short of analyst expectations. Japan’s composite PMI reading was unchanged from June’s four-month low.
Compared to closing levels before the weekend, the dollar is up 0.3% against the euro and 0.1% versus sterling but also down by 0.5% relative to the yen, 0.1% against the Swiss franc, and 0.3% vis-a-vis the Canadian and Australian dollars.
Ten-year sovereign debt yields are down eight, six and three basis points in the U.K., Germany and United States, but their Japanese counterpart is a basis point firmer. Policymakers at the Fed and ECB are widely expected to raise interest rates this week. A review of Japanese monetary policy also scheduled this week is not expected to elicit any changes. Investors also await a slew of corporate earnings reports this week, especially from the tech sector heavyweights.
The price of Bitcoin tokens dived 2.6% overnight. Gold and oil are up 0.1% and 0.5%, by contrast.
In stock market action today, share prices closed up 1.2% in Japan but down 2.1% in Hong Kong. The Spanish IBEX reacted negatively to the aforementioned election results, dropping 0.7%. The Paris CAC is 0.4% lower, and the German DAX is flat. U.S. stock futures are marginally firmer.
Euroland’s composite purchasing managers index dropped a full point to an 8-month low of 46.9, weighed down particularly by a 38-month low in the manufacturing index of 42.7 but also reflecting a 0.9-point drop in the services PMI to a 6-month low of 51.1. The reports revealed that softer demand has promoted lessening inflation, with the input and output price service sector measures falling to 26- and 21-month lows.
Within the euro area, Germany’s composite, manufacturing and service sector PMI readings of 48.3, 38.8 and 52.0 for July represented 8-, 38-, and 5-month lows. France’s 46.6 composite PMI highlighted the fastest rate of contraction in 32 months and embodied 38- and 29-month lows, which also were below the 50 level that divides positive from negative growth.
The British composite PMI score of 50.7 was at a 6-month low, thanks to a 38-month low of 45.0 in the reading for manufacturing and a 6-month low of 51.5 in the services PMI.
Japan’s composite PMI score of 52.1 matched June’s 4-month low. Manufacturing showed a second straight sub-50 reading, a 3-month low of 49.4 and a 6-month low of 48.0 in services.
All three Australian PMIs were in the forties: a 7-month low of 48.3 in the composite index, a 5-month high in manufacturing of 49.6, and a 7-month low of 48.0 in services.
Lebanese consumer price inflation slowed to a 4-month low in June of 254% despite a 7.2% month-on-month leap.
Alternatively, CPI inflation continued to slow in Malaysia to a 14-month low of 2.4% in June versus a 16-month high of 4.7% last August and in Singapore to a 16-month low of 4.5% versus a 270-month peak last August of 7.5%.
A 9.5% year-on-year drop in Finnish producer prices recorded in June was the steepest 12-month decline in 165 months and a 41.2 percentage point swing from the record high of 31.7% posted in May 2022.
New Zealand experienced a third straight trade surplus in June, but it’s NZD 9 million size was smaller than the surpluses in May and April.
Czech consumer confidence rose to a 3-month high in July, but business confidence tick up just 0.1 index point above June’s two-year low and remained well below April’s 9-month peak.
In Taiwan between June 2022 and June 2023, retail sales rose 13.9% while industrial production fell 16.6%.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Preliminary purchasing manager survey results, Spanish 2023 election
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