Growth Worries Pressure Greenback

* The dollar dropped on Thursday ahead of Friday’s release of US June employment data and a long 4th of July weekend. Some signs show the global economic recovery may be in jeopardy. The Chinese and US purchasing managers indexes fell more than expected. Rising US initial jobless claims, plunging pending home sales and weak auto sales also worried investors. The USD/JPY decline to the lowest level since December pressured stocks to their lows; however, both pared their losses in late trading. The S&P 500 declined 3.34 to 1,027.37. The EUR/USD broke resistance from its downtrend and rallied to 1.2515, supported by a successful Spanish bond auction. Sterling surged above the 1.50 handle again. The Australian and Canadian dollars rose despite falling commodity and sharply lower gold prices. The Canadian markets were close for Canada Day.

* Falling to the lowest level since early-May, the dollar index broke the important 85-area support today. The index had consolidated gains since reaching a 15-month high over three weeks ago. Today’s market action was a bit unusual. A lower dollar normally supported stock prices, but today’s dollar decline did little to support stocks. However, further USD declines may start supporting the stock markets as dollar weakness will decrease debt deflation pressures. There are minor support at the 84-handle and resistance in the 85 area.

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Financial and Economic News and Comments

US & Canada

* The ISM US manufacturing index declined to a lower-than-expected 56.2 in June from 59.7 in May, indicating US manufacturing activity expanded above the 50 growth level for an 11th straight month but at the slowest pace since December 2009, according to data from the Institute for Supply Management. The index’ key components decreased in June but remained at high levels, signaling growth. The new orders index fell to 58.5 from 65.7, showing new orders grew for a 12th successive month but at a slower rate. The production index declined to 61.4 from 66.6, suggesting manufacturing production expanded for a 13th straight month but at the slowest pace since March. The employment index slipped to 57.8 from 59.8, showing manufacturing employment grew for a seventh consecutive month but at the slowest rate since March. The prices paid index dropped to 57.0 in June from 77.5 in May, suggesting price pressures increased for a 12th straight month but at a slower pace.

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* US initial jobless claims in the week ending June 26 unexpectedly rose 13,000 to 472,000 from the previous week’s upwardly revised 459,000, figures from the Labor Department showed. The 4-week moving average increased 3,250 to 466,500, the highest level since March. Continuing claims in the week ending June 19 jumped 43,000 to 4,616,000 from the preceding week’s upwardly revised 4,573,000; however, the 4-week moving average fell 25,250 to 4,567,500. The insured unemployment rate for the week ending June 19 was 3.6%, unchanged from the prior week’s upwardly revised 3.6%.

* The NAR US pending home sales index, a leading indicator for the housing sector, plunged a more-thananticipated 30.0% m/m to 77.6 in May, the largest drop in records dating to 2001, after a 6.0% m/m increase to 110.9 in April, showing US pending home sales fell for the first time in four months with the expiration of the deadline for the homebuyer tax credit, according to a report from the National Association of Realtors. May pending home sales decreased 15.9% y/y, following a 22.4% y/y April gain.

* US construction spending slipped a less-than-expected 0.2% m/m to a seasonally adjusted $841.9 billion annual rate in May, the first decline in three months, after a downwardly revised 2.3% m/m increase in April, data from the Commerce Department showed. May construction spending fell 8.0% y/y, continuing year-onyear falls since November 2007.

Europe

* The eurozone manufacturing PMI edged down to an unrevised 55.6 in June from 55.8 in May, suggesting the eurozone manufacturing sector expanded for a ninth consecutive month but at the slowest rate in four months, according to final June PMI data from Markit Economics.

* The German manufacturing PMI was at 58.4 in June (vs. preliminarily reported 58.1), matching May’s reading, indicating the German manufacturing sector expanded for a ninth straight month, final June PMI data from Markit Economics showed.

* German retail sales, adjusted for calendar and seasonal variations, increased as forecast 0.4% m/m in May, the first gain in three months, after a downwardly revised 0.5% m/m decline in April, according to data from the Federal Statistical Office. Retail sales fell 2.4% y/y nsa, the 12th fall in 13 months, following April’s revised 3.6% y/y decrease.

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* The UK manufacturing PMI slipped to 57.5 in June from the 15-and-a-half-year highs of 58.0 in April and May, showing UK manufacturing growth continued for nine successive months, data from Markit Economics and the Chartered Institute of Purchasing and Supply showed.

* The SVME Swiss PMI slipped to 65.7 in June from 66.4 in May, suggesting Switzerland’s manufacturing activity expanded for a 10th straight month but at a slightly slower pace, according to a survey from the Swiss Association of Purchasing and Materials Management and Credit Suisse.

Asia-Pacific

* Business sentiment among large manufacturing and service companies in Japan improved for a fifth consecutive quarter in Q2 2010 and reached a 2-year high, the Bank of Japan’s latest Tankan survey showed. The large manufacturers index rose to 1 in Q2 from -14 in Q1, indicating largest manufacturers turned optimistic about the economy for the first time in two years. The non-manufacturing index increased to -5 from Q1’s -14, showing confidence among large service companies rose to the highest level since September 2008. The Tankan all industries capex index, measuring capital expenditures by all Japanese industries except the financial industry, showed large manufacturers and non-manufacturers plan to increase business investment by 4.4% in the year ending March 31, the first rise in three years, and they see profit climbing 21.6%.

* The Australian Industry Group-PricewaterhouseCoopers Australian performance of manufacturing index declined to 52.9 in June from 56.3 in May, showing Australia’s manufacturing sector expanded for a sixth consecutive month but at a slower pace, the AiG and PwC reported.

* Australia’s seasonally adjusted retail sales increased a marginally less-than-expected 0.2% m/m to A$20.16 billion ($16.94 billion) in May, the smallest gain in three months, after a 0.6% m/m advance in April, according to figures from the Australian Bureau of Statistics (ABS). Retail sales grew 0.6% y/y nsa, following April’s 0.9% y/y gain.

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* Australian seasonally adjusted building approvals unexpectedly declined 6.6% m/m to 13,412 in May, the fourth fall in five months, after a revised 11.4% m/m drop in April, data from the ABS showed. Building approvals rose 26.6% y/y, a 10th straight year-on-year rise, following April’s upwardly revised 22.6% y/y gain. Approvals to build private houses increased 1.7% m/m to 8,835 in May and rose 9.2% y/y. Approvals for apartments and renovations fell 18.8% m/m to 3,643 but surged 86.1% y/y.

* The Chinese manufacturing PMI declined for a second month in June, to a seasonally adjusted 52.1, from 53.9 in May, indicating China’s manufacturing expanded for a 16th straight month but at a slower pace amid a cooling economy, according to PMI data from the Federation of Logistics and Purchasing. The output index lowered to 55.8 in June from 58.2 in May; the new orders fell to 52.1 from 54.8; and the export orders slipped to 51.7 from 53.8. Additionally, the HSBC/Markit China manufacturing PMI decreased to a seasonally adjusted 50.4 in June, a 14-month low, from 52.7 in May.

Источник: Hans Nilsson

01.07.2010