Global Manufacturing PMIs Rise in May, U.S. Reports in Focus

Global Manufacturing PMIs showed an improved economy in May as compared to April. Reports from China to the U.K. over the weekend and early Monday pointed to a rebound in Chinese manufacturing, slower contraction in the eurozone, and growth in the U.K.

Chinese Manufacturing

On Saturday, June 1, China reported that its official Manufacturing PMI rose to 50.8 in May from 50.6 in April. The number was in contrast to the HSBC China Manufacturing PMI, which showed that the manufacturing sector contracted in May as the index fell to an eight-month low of 49.2 from 50.4 in April.

The difference in these reports can be attributed to the sample size of each. The official PMI uses a smaller sample set of companies and focuses on the largest ones while the private sector index focuses on smaller companies. The government, in its official release, noted that smaller manufacturing companies saw weakness in May, giving credence to this disparity.

European Manufacturing

Early Monday, Manufacturing PMIs across Europe were released and showed further improvement in the global manufacturing economy in May from April. First the Eurozone's Manufacturing PMI was released and showed and increase to 48.3 from 47.8 in April. Economists surveyed by Reuters were expecting a reading of 47.8, flat from the prior month.

In the report, each major economy in the eurozone showed a better than expected PMI as well, making the report a total beat of expectations. Manufacturing PMIs from France, Germany, Italy, and Spain all were better than expectations in the report. Notably, Spain's Manufacturing PMI rose to 48.1 in May from 44.7 in April on expectations of a reading of 45.5.

The last major economy to report on its manufacturing sector for May was the U.K., which said that its Manufacturing PMI rose to 51.3 from an upwardly-revised 50.2 (previously stated at 49.8) on expectations of a reading of 50.2. All in all, the global reports showed more strength in the global economy.

Market Reaction

Equities reacted to the news overnight with Chinese shares closing near unchanged and European shares bouncing off of lows following the releases of the data. The Shanghai Composite Index closed higher by 0.02 percent at 2,299.25 and the CSI 30 Index fell a mere 0.15 percent to close at 2,602.62.

European shares recovered early losses and now most major indices traded in the green. The Spanish Ibex Index rose 0.43 percent and the Italian FTSE MIB Index gained 0.31 percent. The German DAX rose 0.4 percent and the French CAC 40 Index showed the most strength, adding 0.73 percent. The only notable laggard was the U.K. FTSE 100 Index which fell 0.17 percent.

U.S. Reports

In the U.S. trading session, two key reports will be released giving further clarity on the state of both domestic and global manufacturing strength. First, the Markit Manufacturing PMI is set to be released at 8:58 am and the market expects that the index was flat in May at 52. Later, the ISM Manufacturing Index, arguably the more important data release of the two, is also set to show that manufacturing was flat in May from April as the market expects a reading of 50.7.