Recap 6-1-12

Main Items:

  • US Non Farm Payrolls declined to 69k in May vs 150k exp and 115k prev. Last month’s figure was revised worse by 40k
  • US Unemployment increased to 8.2% vs 8.1% exp and prev. Household Employment actually improved by 422k, but the participation rate ticked 0.2% higher to 63.8%. (Older college graduates returning to the workforce?)
  • US Hourly Earnings growth declined to 1.7% YoY vs 1.8% exp and prev. Weekly Hours declined to 34.4 vs 34.5 exp and prev
  • US Vehicle Sales declined to 13.8mm in May vs 14.4mm exp and prev.
  • Canadian GDP rose 1.6% YoY in March vs 1.9% exp and 1.6% prev
  • Spain says they don’t need to give Bankia the full EU19B until Oct (the gov’t is attempting to relieve market fears about an imminent cash crunch engulfing the bank and Spain the sovereign). The plan is to give Bankia EU7B in Jul and EU12B in Oct. W


  • Italian Mfg PMI improved to 44.8 in May vs 43.4 exp and 43.8 prev
  • Spanish Mfg PMI declined to 42 vs 43 exp and 43.5 prev
  • UK Mfg PMI declined very sharply to 45.9 vs 49.7 exp and 50.5 prev.
  • Swiss Mfg PMI declined to 45.4 vs 47.4 exp vs 46.9 prev
  • China Mfg PMI dropped to 50.4 in May vs 52 exp and 53.3 prev. The HSBC measure declined to 48.4 vs 49.3 prev
  • Australia Mfg PMI declined to 42.4 in May vs 43.9 prev
  • South Korea Mfg PMI declined to 51 vs 51.9 prev

Upcoming Data:

  • Sat: China Non-mfg PMI
  • Mon: EU Sentix Investor Confidence, EU PPI
  • Tues: RBA, Italian Service PMI, BoC, ISM Non-Mfg, Australia GDP
  • Wed: UK PMI Construction, EU GDP, ECB, US Unit Labor Costs, Australia Employment
  • Thurs: French Unemployment, Swiss Unemployment, Swiss CPI, UK PMI Services, BoE, US initial jobless Claims, Japan Trade Balance


Positive seasonal and technical effects were completely overwhelmed by the horrible data today. The drop in the UK PMI print was the 2nd largest ever. The decline in the headline China PMI print was also bad, and suggests that SOE’s in China didn’t get any relief from recent easing measures. The US manufacturing data was quite good on a relative basis. But the weak Chicago PMI, along with weaker than expected auto sales, suggest that a key pillar of US growth is slowing.

There isn’t much ambiguity in the message from the data now – global growth is slowing substantially. And at the same time, the catalyst for previous risk rallies – additional central bank liquidity – is unlikely to be immediately forthcoming. There is an ECB meeting next week, and the FOMC on 6/20. However, with the SMP still inactive, and ECB rhetoric towards EU governments remains harsh. And NY Fed Chairman Dudley said this week that the cost of easing more is unlikely to be worth the cost. This means that barring an emergency inter-meeting cut, the earliest date for the next ease is July 5th for the ECB and August 1st for the Fed. Note also that it is possible that when the ESM is activated, the peripheral countries decide to tap the funds recap their banking systems. However, the projected activation date isn’t until early July.

Without help from monetary or fiscal policy, it appears unlikely that market momentum to reverse.