With risk appetite already in the dumps following the overnight release of disappointing data out of both Europe and the US, early data from New Zealand and Australia did nothing to help the mood.
New Zealand’s unemployment rate rose to its highest level since 2010 in the first quarter. The jobless rate rose to 6.7 percent, up from a revised 6.4 percent in the last quarter of 2011 and well above market expectations of a 6.3 percent print. The participation rate jumped to 68.8 percent, the highest since 2008, from 68.2 percent while the total number of people unemployed rose to 160,000. The NZD gapped lower in the aftermath of the data and traded with a softer bias throughout the rest of the session as any RBNZ rate hikes are pushed further and further down the pipeline.
In other data, the service sector of the Australian economy is struggling just like its manufacturing counterpart. The AiG services PMI slumped to its lowest since March 2009, registering a lowly 39.6 in April following at 47.0 print in March. The manufacturing index had fallen to 43.9 from 49.5 and suggests the Australian economy, apart from the mining/resource sector, is in a worse situation than previously thought. All the more justification for the 50bp cut from the RBA earlier this week.
The Chinese non-manufacturing PMI was also weaker, but nowhere near as depressing with a dip to 56.1 from 58.0 and, coming on the back of the weak Ozzie data, kept the AUD firmly capped. Note the HSBC non-manufacturing release is scheduled for tomorrow.
Deteriorating manufacturing PMIs out of Europe put the pressure on the EUR early in yesterday’s overnight session while a fresh record high eurozone unemployment rate added to the sentiment. The only bright spot was a better-than-forecast UK construction PMI, which came in at 55.8 versus 54.0 expected and this in turn helped lend GBP some support. As a result, EUR/GBP slid to 2-year lows just above 0.81.
US data was not inspiring either, with the ADP employment change registering a disappointing +119k jobs versus 170k expected and a firm 201k last time. This has perhaps scaled back expectations for Friday’s nonfarm payroll report and led to a broad-based risk-off trade. The ISM reading for New York was also a disappointing 61.2 from 67.4 last while factory orders declined 1.5 percent m/m, the biggest decline in three years, after a downwardly-revised +1.1% in February. Wall St was concerned about the ADP report and the DJIA slid 0.08 percent, S&P 0.25 percent but the Nasdaq managed a 0.31 percent recovery helped by a strong performance by Intel.
Data Highlights
- US MBA Mortgage Applications out at +0.1% vs. -3.8% prior
- US Apr. ADP Employment Change out at 119k vs. 170k expected and revised 201k prior
- US Apr. ISM New York out at 61.2 vs. 67.4 prior
- US Mar. Factory Orders out at -1.5% m/m vs. -1.6% expected and revised +1.1% prior
- NZ Q1 Unemployment Rate out at 6.7% vs. 6.3% expected and revised 6.4% prior
- UK Apr. Lloyds Business Barometer out at 26 vs. 31 prior
- AU Apr. AiG Performance of Services Index out at 39.6 vs. 47.0 prior
- China Apr. Non-manufacturing PMI out at 56.1 vs. 58.0 prior