Prospects Daily: Weakening flash PMIs in the US, Eurozone and China

Financial Markets… The euro fell to a two-week low versus the dollar today, sliding to as low as $1.2973 in morning trade, amid weak service and manufacturing PMI data in the region. The 17-nation currency declined 1.1% against the yen to 128.25.

European corporate bonds advanced on Tuesday as the region’s weak economic trends prompted speculation that the ECB will cut interest rates further to spur growth. Yields investors demand to hold company debt from troubled Euro-zone economies fell to 1.86%, while yields on non-financial company bonds dropped to a record 2.5%.

Developing-country stocks fell for the first time in three days on Tuesday, with the benchmark MSCI Emerging Market Index sliding 0.7%, led by declines in Chinese and Russian shares. China’s Shanghai Composite Index tumbled 2.6%, the largest drop in more than three weeks, while Russia’s Micex Index fell 0.4% to a 10-month low.

High-income Economies… Germany’s flash service PMI estimate of 49.2 (vs 50.9 in March) indicated a contraction for the first time in 6 months. Manufacturing posted a faster rate of contraction (47.9 in April, down from 49.0 in March) led by a marked drop in new domestic and overseas orders. 

Flash PMI estimates for France indicated an easing in the rate of contraction in manufacturing and services in April. The composite PMI index climbed from March’s 4-year low of 41.9, to 44.2, its highest reading in 2013 so far.

Markit’s flash US manufacturing PMI fell to its lowest reading in six months during April, to 52, from 54.6 in March led by a sharp slowdown in new domestic orders, output and hiring. Export orders however grew at a stronger pace than in March.
 
Hungary's central bank cut its policy interest rate by 25 basis points to a record low of 4.75% its 9th successive cut, to support the economy which fell deeper into recession in Q4 and as inflation pressures remained subdued.

Developing Economies…East Asia and Pacific: Preliminary estimates of China’s HSBC/Markit manufacturing PMI index for April dropped to 50.5, down from 51.6 in the previous month. Index is still above 50, indicating expansion; however, it has been weighted down by a drop in export orders.

Sub-Saharan Africa:South Africa’s leading indicator of business activity expanded at a slower pace in February by 1% (y/y), down from the revised 1.2% (y/y) in January. This is an eighth consecutive month of increase, pointing to continued, albeit weak, expansion six to 12 months ahead.