- By Region
Manufacturing surveys from around the globe this week are likely to provide little respite from the upsurge in bearishness provoked by the latest flare-up in Greece’s crisis.
Thursday will be the crucial date for the release of flash purchasing managers’ index figures, with data provider Markit publishing a reading for the US for the first time.
Tai Hui of Standard Chartered said: “Europe and its sovereign debt crisis should continue to take centre stage this week. Meanwhile, the real economy is likely to remain in contraction territory.
“Investors will scrutinise euro area flash PMI surveys for more insight into second-quarter activity after gross domestic product stagnated in the first quarter. The May surveys should signal a GDP contraction as the debt crisis escalates, impacting household and business confidence, as well as banking sector credit conditions.”
Chris Williamson of Markit added: “Policymakers around the world have highlighted the eurozone crisis as a growing risk to the economic outlook.
“The release of the new Markit flash manufacturing PMI for the US on the same day as a similar index for China, and the manufacturing and services flash PMIs for the eurozone, Germany and France, will provide the first picture of how the escalating euro area crisis has affected global economic trends in May.”
Analysts expect the eurozone PMI data to remain firmly below the 50 level that indicates a slowing of activity, but are divided on whether May’s numbers will be even worse than April’s downbeat readings.
Jennifer McKeown of Capital Economics said: “April’s composite PMI out-turn was particularly disappointing at 46.7.
“We expect May’s flash composite eurozone PMI to dip further below the 50 level to 46.0, indicating a faster pace of contraction in overall activity in the region. If realised, this would be the weakest reading since June 2009.”
RBC Capital Markets analysts, who are forecasting a composite reading of 47.9, added: “Although we forecast the euro area manufacturing reading to record a significant rise and we look for a modest increase in the services survey, both of those index levels would remain consistent with a contraction in second-quarter GDP.”
Thursday will also see the release of the Ifo business climate survey for Germany, but Capital Economics foresees yet more fodder for the bears. “With the situation in Greece edging close to crisis point and demand from outside the eurozone slowing, we think the Ifo survey might post its first fall in seven months in May to 109.0,” said Ms McKeown.
The calendar for eurozone bond auctions is set to be light this week, however.
Philip Shaw of Investec said: “In terms of euro area sovereign issuance, there should not be too much to fuel the fire of market jitters, with the emphasis on bills rather than bonds.”
Meanwhile, further insight into the state of the US economy should come from Thursday’s first flash manufacturing PMI.
The data-heavy day will also see the release of US durable goods orders for April.
HSBC analysts said: “Boeing received only four new orders for aircraft in April and this may keep overall durable goods orders from rebounding strongly after a 4 per cent drop in March. We look for total durable goods orders to increase 0.4 per cent month-on-month in April.”