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Eurozone June flash manufacturing PMI 47.8 vs 48.0 expected

  
Analysis, Economy

Latest data released by Markit – 21 June 2019

  • Prior 47.7
  • Services PMI 53.4 vs 53.0 expected
  • Prior 52.9
  • Composite PMI 52.1 vs 52.0 expected
  • Prior 51.8
The overall prints here are more-or-less within expectations as the composite reading risses to a seven-month high. That said, aside from a minor bump in services, manufacturing activity remains more or less unchanged to May in the euro area as a whole so there isn’t much in the “big picture” data here to suggest a meaningful rebound in economic conditions.
EUR/USD holds steady still at 1.1307 currently after being buoyed by the French and German releases earlier in the day.

Japan trade balance data for May, exports slide but not quite as badly as expected

  
Analysis, Economy

Japan Trade balance for May, deficit of 967.1bn yen

  • expected Y -1200bn, prior Y 56.8bn

Adjusted trade balance, deficit of 609.1bn yen

  • expected Y -754.5bn, prior Y -110.9bn

Exports -7.8% y/y

  • expected -8.2%, prior -2.4%

Imports -1.5% y/y

  • expected +1.0%, prior +6.5%

Japan May exports to US +3.3% year/year

  • to China -9.7% year/year
  • to Asia -12.1% year/year

Japan Reuters Tankan (June) – manufacturing index drops again (halves from May!)

  
Analysis, Economy

The monthly poll from Reuters tracks the Bank of Japan’s tankan quarterly survey.

  • Japan manufacturers index +6 in June vs +12 in May
  • non-manufacturers index +22 in June vs +27 in May
  • Japan manufacturers September index seen at +11, non-manufacturers +21
Manufacturers’ business confidence to a more than 2-1/2-year low
  • service-sector mood fell for the first time in four months
  • Both are expected to remain under last month’s levels over the coming three months
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Reuters poll of 505 large- and mid-sized companies, in which 263 firms responded:
  • indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A positive figure means optimists outnumber pessimists.
Next official, BOJ, tankan is due in July

Morgan Stanley says Fed could cut to near-zero in a year

  
Analysis, Economy, Forex

Morgan Stanley on the Fed

  • US-China trade tensions may lead to Fed to lower US rates near zero by Spring 2020
  • US-China tensions may tip US economy into recession in 2020, ‘depending on policy support’
  • US-China trade relations may knock S&P 500 down towards 2400, 10-year yields to 1.75% this year
  • Dollar initially higher against risk-sensitive currencies on trade war, but lower later
These comments are all conditional but point to an ugly outcome if it all goes badly. The question I always ask is: what’s a trade war? Are we in one now, or do we need 25% tariffs on everything and retaliation? There’s also plenty of gray area in between.

Moody’s cuts Turkey’s credit rating deeper into junk territory

  
Analysis, Economy

Turkey’s credit rating has been cut deeper into junk territory by Moody’s Investors Services, with the agency citing its high reliance on external capital flows and rising risk of government default as reasons for the downgrade.

Moody’s cut the country’s long-term debt rating by one notch to B1 from Baa3 and maintained a negative outlook, with the announcement late on Friday prompting a bout of choppiness in the Turkey’s currency, the lira.

The downgrade brings Moody’s in line with Standard & Poor’s rating of B+, which is four notches below investment grade. Fitch’s rating of BB is two notches below investment grade.

Moody’s said the “continued erosion in institutional strength and policy effectiveness on investor confidence” was outweighing positives such as Turkey’s diversified economy and low level of government debt. The inability of political authorities to implement a plan to support the economy remains a key concern. (more…)

Eurozone April industrial production -0.5% vs -0.5% m/m expected

  
Analysis, Economy

Latest data released by Eurostat – 13 June 2019

  • Prior -0.3%; revised to -0.4%
  • Industrial production WDA -0.4% vs -0.6% y/y expected
  • Prior -0.6%; revised to -0.7%
Yet another drop on the month for industrial activity but that falls in-line with expectations despite a notable drop in German factory activity in April. A minor data point but this feeds into overall sentiment of softer conditions in the euro area economy seen in Q2 so far.
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