Despite all that, investors remain fairly upbeat about the global picture. With the exception of a couple of European indices, notably a 1.7% decline in Germany, share indices moved generally higher on Monday and the major currencies were led by the Canadian dollar, with the Aussie in second place. It seems that investors are still looking ahead at the steady flow of cheap money expected from central banks, and not at the myriad arguments against buying risky assets, such as recession, debt and meagre profits.
The optimistic tone was positive for sterling, which took third place behind its Commonwealth cousins. It strengthened by an average of 0.4%, taking a cent each from the euro, US dollar and Swiss franc. The pound also picked up one and a quarter Japanese yen. Over the last seven days it is on average unchanged, though it is still more than 3% below its position at the beginning of May.
The US dollar is in the penultimate position this morning, ahead of the euro, the Swiss franc and the Japanese yen. However, US measures to contain civil unrest have now extended to a curfew in New York City, with the president threatening to send in the army.
The purchasing managers’ indices, which hogged the ecostat agenda on Monday, were mostly higher on the month. That said, all but the Chinese manufacturing PMI were in the recession zone below 50 and several fell short of forecast.
The European PMIs ranged from Germany’s 36.6, a two-month high, to Italy’s 45.5, a three-month high. For Euroland as a whole the reading was 39.4. Markit, the compiler of the survey, described the situation as “a noticeable easing in the recent downturn”, thereby damning it with faint praise. The UK manufacturing PMI was slightly above the euro zone median at 40.7, just ahead of France and Canada at 40.6.
Investors have become accustomed to the two US PMIs sending different signals but that was not what they got yesterday from the ISM and Markit. ISM’s 43.1 was one and a half points higher on the month while Markit improved by three and three quarter points to 39.8. Both surveys noted a continued deep downturn in demand.
In the eye of the storm between the manufacturing and services PMIs, today’s agenda is relatively brief. Nearly half of the items have already been covered.
New Zealand building permits were down by 6.5% in April. The Reserve Bank of Australia surprised nobody when it left its Cash Rate – and the target yield for 3-year bonds - unchanged at 0.25%. There was similarly little amazement when Nationwide reported a 1.7% monthly fall in UK house prices which left them 1.8% higher on the year. Ditto with the 20% fall in Swiss retail sales: it was nasty, but not dramatically worse than equivalent data from elsewhere.
This morning SVME publishes its Swiss manufacturing PMI. The guess is 42. Bank of England credit and mortgage data for April will be complicated by the lockdown and, therefore, an unreliable indicator. There is nothing of real consequence from North America. There might be something to be seen when the Debt Management Office announces the results of the 27- and 29-year gilt auctions held last week, given that a recent auction resulted in a negative yield.