The following is an contribution for your consideration:
Tuesday morning’s purchasing manager index from Chinese HSBC proved to be particularly disappointing, at just 50.5, spoiling Monday’s strong European finish on Wall Street. As long as poor data continues to feed in, there will be sustained concerns, in spite of relatively resilient markets in the US and Europe.
Eurozone manufacturing and services PMI data for April is widely expected to show some measure of improvement compared to a fortnight ago, but there are still significant worries about the state of the French economy. Announcements have been disappointing, with things sliding downward for the key Eurozone member. Confidence in President Hollande is also decreasing rapidly, furthering the uncertainty. Having said that, French manufacturing PMI figures are due for a 0.1 improvement, with services expected to receive a 0.7 boost. The current 41.3 services index is a four year low.
Germany is still the exception to the rule in Europe, with a sturdy outlook, but is not showing huge signs of improvement. There is no expected manufacturing change, with the figure staying at 49. Services should see a rise from 50.9 to 51.
Across the board, the European figures should see a slight increase in services, up to 46.5, though manufacturing is likely to be a static 46.8. The economy isn’t facing any significant barriers, but it is certainly hesitant, which has contributed to the current decrease in long term currency trading volumes. speculating with brands such as CMC and scalping is more popular in the current climate.
The political stalemate in Italy will ensure that consumer confidence will continue its slide by a couple of percentage points, down from 85.2. Things may change if the President makes good of his threat to resign, or the politicians attempt to make progress, but the outlook is negative for the time being.
Last week saw the UK predictably stripped of its triple-A credit rating from Fitch, with the country becoming somewhat a hotbed of debate over the argument between debt and austerity. This is a topic affecting not only the UK and Europe, but economies all over the world. It’s certainly the primary cause for fiscal friction within governments.
As a result of European problems, UK Chancellor George Osborne looks to be easing his policy of heavy public spending cuts, with growth issues likely playing on his mind. Public finance numbers for March show that the annual deficit is likely to reach close to 2012’s figure of £121 billion. This slight improvement will be much greater than Osborne’s earlier estimate, made last year.
The debt versus austerity debate has claimed the reputation of both ratings agencies and the IMF, as contradictory views have been issued and proved false. Currently, Standard and Poor’s is the only agency to have the UK on an AAA rating, issued on the Chancellor’s current plan. This would suggest that Osborne will continue in a similar fashion regardless of the IMF’s input when they give their immanent review of the UK’s financial status.