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US manufacturing activity slips as Europe recovers

Manufacturing activity appeared to be diverging around the globe with Asian and European Manufacturing Purchasing Managers’ Indices (PMI) picking up, while the US PMI fell for a second month in a row. Wall Street struggled to find a clear direction following the news while yields on US government debt dropped on Monday.

Shane Strowmatt, LGT
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The Institute for Supply Management's (ISM) Manufacturing PMI for the US came in at 48.7 in May, down from 49.2 in April, marking two months of decline and two months below the level of 50, which indicates contraction. While the US economy defied economists’ forecasts for recession during 2023 and Europe struggled to produce economic growth, Monday’s PMIs signalled the tides may be turning. Manufacturing PMI for the eurozone, which has been at contractionary levels for nearly two years, increased to 47.3 in May from 45.7 the previous month. Importantly, Europe’s economic powerhouse and largest economy, Germany, appeared to be bottoming out with the country’s Manufacturing PMI increasing to 45.4 in May from 42.5 in April. PMIs out of Asia’s largest economies, such as China and Japan, were also on the rise.

In New York, stock indices were mixed as traders waited for Tuesday’s JOLTS jobs report and Friday’s labour market report from the Bureau of Labor Statistics. The Dow Jones Industrial closed 0.3% lower while the S&P 500 gained 0.1% on the month’s first day of trading. The Nasdaq-100 ended the session up 0.4%. Yields on US government debt retreated on Monday, as investors considered the possibility that a weakening US economy could hasten the Fed’s path to rate cuts. Yields on ten-year Treasuries were trading around 4.4% on Monday and yields on two-year Treasuries were just over 4.8%, coming down from nearly 5% last week.

In Europe, stocks traded mixed Monday with the Euro Stoxx 50 finishing the session up 0.4%. Shares of British pharma giant GSK plummeted nearly 10% after a court in the US state of Delaware allowed evidence to be presented regarding heartburn drug "Zantac", which some former users say causes cancer.

In Turkey, inflation increased beyond 75% in May when compared to the same period a year earlier or 3.4% when compared with April. Economists have projected current inflation levels to be roughly the peak as the country’s central bank has been hiking interest rates in an effort to get inflation under control. It has kept its policy rate at 50% since March.

In the Asia-Pacific region, stock markets were mostly lower on Tuesday. Indian stocks were under pressure as exit polls suggested Prime Minister Narendra Modi was likely to win a third term in a row. India’s Nifty 50 was trading 4.5% lower. In Tokyo, the Nikkei 225 fell 0.5% and in South Korea, the Kospi was trading 0.7% lower. Australia’s S&P/ASX 200 lost 0.3%. Hong Kong's Hang Seng Index gained 0.3%, while the Shanghai Composite was trading down 0.1%.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss Consumer Price Index, German unemployment rate, US JOLTS jobs report.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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