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European Headlines Continues to Overshadow Economic News
US economic data not enough to counter the rising Euro-zone fears
On Thursday, the US Labor Department released the advance figure for seasonally adjusted initial claims in the week ending May 19 and was recorded at 370,000, a dip by 2,000 from previous week's revised figure of 372,000, from an original reading of 370,000. Analysts had a forecast that claims would climb to 372,000. Meanwhile, the 4-week moving average fell by 5,500 to 370,000, from the previous week's revised average of 375,500. The monthly employment report, scheduled to release next week, will reveal a more accurate picture of the actual hiring trends.
Also On Thursday, the U.S. Census Bureau announced that new orders for manufactured durable goods in April increased 0.2% to $215.5 Billion, followed a 3.7% decrease in March. The gain was lead by transportation sector, which recorded $1.3 Billion or 2.1% increase to $62.2 Billion mainly due to motor vehicles and parts, which increased $2.3 Billion. Excluding transportation, new orders decreased 0.6%.
Source: United States Census BureauThe Markit Flash U.S. Manufacturing PMI, announced on Thursday, fell to three-month low, signaling slower rate of manufacturing expansion. PMI falling from 56.0 in April to 53.9 signaled the weakest expansion in three months.
Uncertainty prevails in Europe
On Friday, findings of the GfK Consumer Climate study for Germany said that consumer climate is expected to remain stable in June. The indicator is forecasting 5.7 points for June, following a revised value of 5.7 points in May.
However on Thursday, data showed that German private sector returned to contraction and manufacturing output fell at sharpest pace for nearly three years with the country's Composite Output Index falling to 49.6 in May from 50.5 in April, lowest in 6 months. Meanwhile, the Ifo Business Climate Index for industry and trade in Germany tumbled in May to 106.9 from 109.9 in April, well short of consensus estimate.
Bankia, Spain's fourth-largest bank, may ask the government for more than 15 Billion Euros for a bailout after the new management team meets on Friday. Bankia was partially nationalized earlier this month by conversion of 4.5 Billion Euro of government loans into shares, due to its heavy exposure to toxic real-estate loans.
Media reports said on Thursday that Italy's Prime Minister Mario Monti believes Greece will remain in the euro zone but adding to his comments he said that it was not a certainty. Monti also added that Germany has an interest in ensuring that no member leaves the euro.
European headlines will continue to overshadow economic news and amid a clouded global growth outlook, market sentiment is likely to remain fragile and safe-haven flows will continue lifting the dollar.
Haresh Menghani
Market Analyst
Admiral Markets
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