Intraday Market Thoughts

Both German PMIs Worsen, Spain Yields at 7.62%

by Patrik Urban
Jul 24, 2012 12:46

European manufacturing PMIs disappoint; Chinese HSBC manufacturing PMI improve; UK BBA mortgage approvals fell; Spanish 10 year yield post their 7th straight daily increase to at new Eurozone-era highs of 7.62%. Gold & Aussie charts were added to Mondays Premium Insights. Shots in EUR, GBP and US crude are already in progress. and See more below.

Selling pressure, at least on commodity dollars, eased during the Asian session after Chinese HSBC manufacturing PMI improved to 49.5 in July from June's 48.2 which is 5 month high. AUDUSD retraced to 1.0304 before falling to current 1.0270.

Since London open, EUR traded with a weak underlying tone after all European July manufacturing PMI's not only came in below expectations but also showed fresh declines compared to June. French manufacturing PMI dropped to 43.6 from 45.2, German PMI declined to 43.3 from 45.0 and Eurozone PMI fell to 44.1 from 45.1. Service sector showed a contraction in Germany and Eurozone as a whole but expanded in France (PMI at 50.2 vs. June's 47.9).

Most worrying aspect of today's data is the decline in both sectors in Germany. New business fell at the fastest pace since 6/2009 and new export orders fell the most since 5/2009 which is likely to push q/q GDP growth back into negative territory. EURUSD trades near session lows around 1.2095.

UK data calendar was limited to BBA mortgage approvals that declined in June to 26.27K from previous 29.56K. GBPUSD continues to trade around the 1.55 handle.

Spanish 10 year yield hit a new record high at 7.62% and Italian counterpart trades and 6.46%. Spain sold 3 and 6 month bills totaling EUR 3.048 bln vs. 2-3 bln target. Average yields rose slightly but bid to cover improved.

The US session begins at 8:30 am ET with Canadian retail sales that are expected to rise in May 0.4% from previous -0.5%. Core sales are seen at 0.1% from -0.3%.

Markit Manufacturing PMI is due at 9:00 am and is anticipated to decline slightly to 52.1 in July from previous 52.5 while May house price index due at 10:00 am is expected to slow to 0.4% from 0.8%

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