Intraday Market Thoughts

PMIs Show Under the IFO & ZEW Hood

by Ashraf Laidi
Apr 23, 2012 13:13

Australian PPI declined; Chinese HSBC PMI still in contraction; Eurozone and German PMI disappoint; Spain re-enters a recession. Canadian wholesale sales are next. Todays Premium Intermarket Insights shall be added around the UK Close. Ashraf warned on Friday after the IFO that "If the tapering off in the IFO begins to move in line with the retreat in the PMI, then this could clash with the ECBs attempts to leave the LTRO behind and return to worrying about inflation". Indeed, today's Flash PMI add to the already falling fiures from the past 3 months.

USD stronger in the ongoing session against all majors except the JPY. European equities are losing nearly 2% and the relative strength winner is JPY while AUD and NZD are the weakest.

The Asian session started with two releases that both contributed to AUD weakness. Australian Q1 PPI printed lower than expected -0.3% from 0.3% q/q (1.4% from 2.9% y/y) and HSBC Chinese manufacturing PMI remained for sixth month in a row in contraction as it printed 49.1 from 48.3. AUD is likely to stay under pressure as this evening's CPI is also expected to decline, indicating that rate cut at a next RBA meeting is probable. AUDUSD fell to below 1.03 level.

The common currency came under pressure during the London session and fell to 1.3133 after all Eurozone April PMIs confirmed intensifying contraction. The composite index fell to 47.4 from 49.1, PMI manufacturing declined to 46 from 47.7 and PMI services dropped to 47.9 from previous 49.2.

Germany had solid Ifo and ZEW numbers last week but today's PMI was mixed. PMI services improved to 52.6 from 52.1 but PMI manufacturing dropped to 46.3 from 48.4 which is the lowest level since July 2009. The Bundesbank said that basic conditions remain good but acknowledged that the economy lacks momentum.

Germany sold only EUR 1.96 bln worth of 12 month bill, considerably below EUR 3 bln target. However, the average yield was slightly lower and cover improved.

In other news, Bank of Spain estimates that Spain entered into a recession as the economy contracted 0.4% in Q1 q/q (-0.5% y/y) and the Dutch cabinet will offer resignation to the Queen.

The US session is limited to Canadian wholesale sales that are expected to remain negative but rise in February to -0.1% from January's -1.0%. There are no US data reports due today.

Parik Urban


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