Euro-Area Momentum Eases as Best Quarter in Over Six Years Ends
The euro-area economy recorded its fastest expansion in six years in the second quarter even as momentum eased in June due to weakening services activity. A composite Purchasing Managers’ Index dropped to a five-month low of 55.7, IHS Markit said on Friday. Economists surveyed by Bloomberg predicted the index would ease to 56.6 from 56.8 in May. Manufacturing grew at its steepest pace since 2011, while a gauge for services slipped to a five-month low. The report comes two weeks after the European Central Bank said risks to the economic outlook were broadly balanced and no longer tilted to the downside. The recovery is broad-based and companies are adding jobs at a brisk pace amid strong optimism about future growth, IHS Markit said. “Although the PMI data point to some loss of growth momentum in June, the latest reading needs to be looked at in the context of recent elevated levels,” said Chris Williamson, chief business economist at the London-based company. “Despite the June dip, the average expansion in the second quarter has been the strongest for over six years and is historically consistent with gross-domestic-product growth accelerating from 0.6 percent in the first quarter to 0.7 percent.”
China, India, Japan hamper Asia oil demand growth, efforts to balance market
As the global oil market frets about a stubborn supply glut, faltering demand growth in key Asian crude importers is further hampering efforts to restore market balance. A fuel glut in China, a hangover from demonetization in India, and an ageing, declining population in Japan are holding back crude oil demand growth in three of the world’s top four oil buyers. The three countries make up a fifth of 97 million barrels per day (bpd) in global oil consumption, and any hiccups among them will mean lower-than-expected oil demand growth in Asia, helping to undercut the OPEC-led effort to support prices. “We are indeed seeing lower demand from more than a few clients – air, marine, road, industrial … They are actually consuming less fuel than anticipated,” said Michael Corley, managing director of Mercatus Energy Advisors. In China, vying with the United States as the world’s biggest oil importer, imports in May were still at a near record of 9 million bpd, but a looming cut in refinery operations is set to hit demand for crude oil in the third quarter.
TREASURIES-Yields inch higher; Fed speakers in focus
Treasuries yields edged higher on Friday as investors waited on Federal Reserve speakers for any new indications on when the U.S. central bank is likely
to next raise interest rates, after inflation concerns this week sent the yield curve to almost 10-year lows. The yield curve between five-year notes and 30-year hit its flattest levels in almost 10 years as oil prices declined and concerns lingered over last week’s weaker-than-expected Consumer Price Index report.“For the third month in a row, (CPI) was way below expectations,” said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. Continued declines in non-seasonally adjusted consumer prices played a large role in the move, he added. A decline in oil prices despite positive fundamentals added to concerns, Vogel said. The yield curve was last at 97 basis points after flattening to 95 basis points on Thursday, the lowest since December 2007. Benchmark 10-year notes were down 4/32 in price to yield 2.17 percent, up from 2.15 percent on late Thursday. Fed officials including New York Fed President William Dudley and Boston Fed President Eric Rosengren both took a hawkish tone this week on monetary policy, noting that pausing the tightening cycle could pose risks to the economy.