Market Overview

Service PMI Round-Up: China, Eurozone Disappoint as Britain Improves

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Global service PMIs were released overnight with weakness in China and the eurozone weighing on markets around the world. A slower pace of expansion in China's service sector increased fears of a China hard landing while a weaker than expected reading in the eurozone coupled with a flare up of political tensions across the continent weighed on shares.

China Declines

The National Bureau of Statistics in China reported that the official non-manufacturing PMI declined to 53.9 in June from 54.3 in May, a ten-month low. Monday, China reported that its manufacturing PMI fell to a four-month low and the two indices confirm recent fears of a more protracted China slowdown.

The private sector HSBC China non-manufacturing PMI did rise slightly to 51.3 from 51.2 in May, however the very marginal uptick was offset by the much steeper decline in the official number weighed on sentiment.

Related: S&P Takes the Axe To Banks; Shares Drop.

Eurozone Fears Flare

The broad eurozone services PMI for June also was weaker than expected, coming in at 48.3, up from May's 47.2 but below the flash estimate and the forecast of 48.6. The weak services PMI is a blow to the positive sentiment created Monday from the better than expected manufacturing PMI.

Spain was a notable stand out in June, with its services PMI rising to a 22-month high of 47.8 vs. 47.3 in May and better than the expected 47.5 However, weak reports in Germany and Italy weighed down the broad eurozone index, especially fears over Germany whose manufacturing and services sectors both grew much less slowly than expected in June, according to the PMI figures released this week.

United Kingdom Shines

A notable stand out performer in the Wednesday PMI releases was the United Kingdom. The U.K. services PMI jumped to a 39-month high of 56.9 in June from 54.9 in May on expectations of a weaker reading at 54.5.

Shares Drop, Pound Sterling Rallies

European shares traded lower on the weak results, as the Spanish Ibex Index dropped 2.08 percent and the Italian FTSE MIB Index fell 1.3 percent. In Germany, the DAX fell 1.42 percent while the French CAC 40 Index declined 1.43 percent and U.K. shares dropped 1.57 percent.

In Asia overnight, Chinese shares traded lower on the weaker than expected services PMI as financials were especially weak on fears that the recent liquidity crunch hurt services activity in June. The Shanghai Composite Index fell 0.61 percent while the CSI 300 Index dropped 0.82 percent and the Hang Seng Index in Hong Kong declined a whopping 2.48 percent.

The pound rallied on the strong figure as markets reassessed the need for new Bank of England Governor Mark Carney to have to ease earlier. The pound gained 0.69 percent against the dollar and 0.79 percent against the euro as the dollar declined broadly across the board.

Posted-In: News Emerging Markets Eurozone Forex Events Global Econ #s Economics Best of Benzinga

 

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