Europe follows China with PMI misses .....brown shoots ?
Submitted by Tyler Durden on 04/23/2013 06:54 -0400
http://www.zerohedge.com/news/2013-04-22/china-pmi-miss-slams-jpy-carry-trades
Submitted by Tyler Durden on 04/22/2013 22:10 -0400
http://ransquawk.com/headlines/s-p-says-more-than-1-3-chance-s-p-will-lower-japan-s-aa-long-term-sovereign-rating-23-04-2013
( Timing interesting ... )
Latest Global Economic Slowdown Confirmed After Disappointing Chinese, German PMI Data
If there was any debate about the global economic contraction, driven largely due to pundits confusing manipulated stock market levitation with this anachronistic thing called the "economy" and fundamentals for the fourth year in a row, all doubts were removed after this morning's manufacturing PMI data out of China, which as reported previously was a big disappointment (sending the Composite firmly into the red for the year down 2.57% to 2184.5) only to be followed by just as disappointing manufacturing and services PMI data out of Germany, which tumbled from 49 and 50.9 to 47.9 and 49.2, respectively, missing estimates of 49.and 51. This was the first decline in the German private sector since November 2012 and thus, for Europe's growth core.
The composite German PMI tumbled to a 6-month low of 48.8 as a result, dropping at its fastest pace since October 2012, meaning the European economic deterioration is just getting started, and at the worst possible time for Merkel several months ahead of her reelection campaign. The end result was a miss in the blended Eurozone Mfg PMI, which dropped from 46.8 to 46.5, even as the less relevant Services component eaked out a small gain from 46.4 to 46.6, on the back of a dead cat bounce in French economic indicators. Bottom line: a contraction in both European manufacturing and services for the 15th consecutive month.Some "recovery."
Commenting on the flash European PMI data, Chris Williamson, Chief Economist at Markit said:
“Although the PMI was unchanged in April, the survey is signalling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease.“Thanks to an upturn in the survey at the start of the year, the PMI suggests that euro area GDP fell by around 0.2-0.3% in the first quarter after a 0.6% drop at the end of last year. However, the April reading points to a 0.4% rate of decline, with downside risks. Worryingly, the rate of loss of new business gathered further momentum, suggesting that activity and employment could fall at steeper rates in May.“The renewed decline in Germany will also raise fears that the region’s largest growth engine has moved into reverse, thereby acting as a drag on the region at the same time as particularly steep downturns persist in France, Italy and Spain.“Policymakers will at least be relieved to see inflationary pressures cooling, which could further open the door to renewed policy stimulus.”
Needless to say, this is bad news for EUR bulls (such as all sellside banks who have been furiously selling their EUR exposure to clients on their long EUR calls for the past 3 months, and all GETCO ES-linked correlation signals) as the ECB was just waiting for an indicator that the European economy was slowing down even more before it cut rates. It just got this indicator today.
Confirming that the market is no longer driven by anything remotely related to underlying economics, stock futures have barely moved and in fact are green for the S&P and Dow, reflecting hopes of even more easing out of Europe this time, while Italian 10 Year bonds have dropped below 4% for the first time since November 2010 on hopes of who knows what: that Italy will have a functioning government perhaps? Yes, funnier things have been said. But if this lunacy explains the Italian bond rip, nobody knows why Spanish bond yields are tumbling. Oh wait, the Japanese liquidity tsunami. All is clear now. As for French 10 year bond yields dropping to a record low yield of 1.708%? Ah, forget it.
Some other highlights out of doomed Europe, only kept afloat courtesy of the Japanese wall of money:
- EC May Allow Spain 2013 Budget Deficit at 6.5%: El Pais
- Bank of Spain Considers New Rules on Risky Loans: Pais
- Spanish 10-Year Bonds Advance for Fifth Day; Bunds Gain
- Italy’s Grillo Says State to Run Out of Funds in Fall: Bild
- Goodbody: Irish Precautionary Program Would Aid Bailout Exit
European markets recap:
- Spanish 10Y yield down 14bps to 4.35%, lowest since Nov. 2010
- Italian 10Y yield down 7bps to 3.99%, lowest since Nov. 2010
- Portuguese 10Y yield down 10bps at 5.779%, lowest since Oct., 2010
- Irish 10Y yields down 17bps at 3.493%, earlier hit lowest since 2006 at 3.479%
- U.K. 10Y yield down 2bps to 1.63%
- German 10Y yield down 2bps to 1.21%, earlier hit lowest since July 2012 at 1.193%
- Bund future up 0.16% to 146.59, earlier hit YTD peak of 146.77
- BTP future up 0.71% to 114.95, earlier hit YTD peak of 115.04
- EUR/USD down 0.64% to $1.2983
- Dollar Index up 0.36% to 82.97
- Sterling spot down 0.44% to $1.5223
- 1Y euro cross currency basis swap down 1bp to -23bps
- Stoxx 600 up 0.93% to 288.34
* * *
http://www.zerohedge.com/news/2013-04-22/china-pmi-miss-slams-jpy-carry-trades
China PMI Miss Slams JPY-Carry Trades
Thanks to a drop into contractionary territory for both New Export Orders and Employment, HSBC's Flash China Manufacturing PMI missed expectations and dropped to its equal lowest 'expansionary' print in six months. Also struggling with pricing power, as the China industry minister notes the country is "clearly facing over-capacity problems," commodity currencies (and the Shanghai Composite) are getting monkey-hammered. As we noted earlier, China is somewhat hamstrung in its ability to save itself this time, and further to that, the China industry minister added, "companies have no strong desire to invest."
After some 'hope' it appears, just as with GDP, that China is reverting to its expansionary-contractionary self...
but this did not play well with JPY-based carry trades in the commodity currencies...
Shanghai Composite...
Charts: Bloomberg
http://ransquawk.com/headlines/s-p-says-more-than-1-3-chance-s-p-will-lower-japan-s-aa-long-term-sovereign-rating-23-04-2013
( Timing interesting ... )
S&P says more than 1/3 chance S&P will lower Japan's AA- long term sovereign rating
Says:
- Japan downgrade risk arises from risks linked to government initiatives and uncertainty of their success.
- Japan's effort to escape deflation a 'drastic departure'.
http://ransquawk.com/headlines/japanese-pm-abe-says-chinese-intrusion-in-japan-s-waters-reaction-to-fishing-and-that-china-has-no-right-to-complain-about-japan-s-fishing-23-04-2013
( China doing a wag the dog caper ? )
- Japan downgrade risk arises from risks linked to government initiatives and uncertainty of their success.
- Japan's effort to escape deflation a 'drastic departure'.
http://ransquawk.com/headlines/japanese-pm-abe-says-chinese-intrusion-in-japan-s-waters-reaction-to-fishing-and-that-china-has-no-right-to-complain-about-japan-s-fishing-23-04-2013
( China doing a wag the dog caper ? )
Japanese PM Abe says Chinese intrusion in Japan's waters reaction to fishing and that China has no right to complain about Japan's fishing
Update details:
- These comments relate to previous reports that 8 Chinese ships entered Japanese waters near the disputed Senkaku islands.
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