26 June 2023
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PMI results indicate slowing developed markets

By Daniel Richards

There was a raft of disappointing PMI survey results from developed markets on Friday which will further fuel market concerns around a more marked slowdown in economic growth than has been the case to now. In the US, the manufacturing PMI was worse than anticipated as it fell back to 46.3 – this was the lowest reading since December and missed projections of 48.5. Services held up comparatively well at 54.1, broadly in line with expectations but also somewhat slower than the previous month’s 54.9. The composite PMI reading was 53.0, down from 54.3.

France’s headline PMI survey saw a surprise contraction in June on the preliminary reading as it fell to a contractionary 47.3, down from 51.2 in April and missing projections of 51.0. Manufacturing was expected to remain weak, and it came in at 45.5, broadly in line with both recent readings and consensus. However, services also turned contractionary at 48.0, missing projections of 52.1. This was the first negative reading for the services component since January. Germany’s composite PMI also disappointed, and while it remained positive at 50.8 this was short of the predicted 53.3. Services were somewhat weaker than predicted but remained positive at 54.1. However, manufacturing fell to just 41.0, missing projections of 43.5 and marking the weakest reading since the height of the Covid-19 crisis. The composite Eurozone PMI remained positive but fell to 50.3, from 52.8 previously and missing projections of 52.5. Both services and manufacturing underwhelmed.

The UK’s PMI for June was also weaker than anticipated, coming in at 52.8 on the composite, down from 54.0 in May and missing the consensus prediction of 53.6. Manufacturing was at 46.2 while services came in at 53.7. More positively, UK retail sales expanded 0.3% m/m in May. Stripping out auto fuel the gain was a lesser 0.1%, but this was still stronger than the predicted 0.3% contraction, with warm weather helping to drive online sales of outdoor goods and summer clothes. The UK consumer has held up comparatively well so far in the face of a series of rate hikes, and the GfK consumer confidence index rose for the fifth consecutive reading to a 17-month high for June in other data out Friday. However, the 50bps hike by the Bank of England last week will likely dampen confidence and spending in the coming months as the rise feeds through into higher mortgage payments and effects a commensurate decline in disposable incomes.

Turkey’s trade deficit widened to USD 12.53bn in May, from USD 8.74bn in April. This makes it the second widest in the past 20 years, somewhat narrower than the USD 14.3bn deficit recorded in January. ‘Pearls, Precious Stones & Metals’ imports were up 91% y/y, likely reflecting ongoing demand for gold. Meanwhile tourist arrivals in Turkey were up 16.2% y/y in May as the sector continues to realise strong growth in a positive for the current account.

Bahrain CPI inflation was at 0.7% y/y in April compared to -0.1% the previous month.

Today’s Economic Data and Events

  • 12:00 Germany IFO business climate, June. Forecast: 90.5
  • 12:00 Germany IFO expectations, June. Forecast: 88.5

Fixed Income

  • US Treasuries rallied at the end of the week as soft PMI prints from major economies raised market anxiety over a more entrenched slowdown. Yields on the 2yr UST fell about 5bps to close at 4.7412% while the 10yr yield fell 6bps to 3.7347%. Markets are pricing in nearly a 75% chance of a 25bps hike from the Fed at the July FOMC meeting in a month’s time.
  • European bonds pulled much stronger as weak PMI prints—the preliminary composite for the Eurozone fell to 50.3 from almost 50.3 a month earlier—dampen the prospect of aggressive moves from the European Central Bank. Bund yields fell 14bps to 2.351% while French 10yr yields fell 15bps. Gilt yields also pulled lower, down about 5bps to 4.311%.


  • The US dollar pulled higher at the end of the week as markets turned to risk off positions. EURUSD dropped by about 0.6% to 1.0894 while GBPUSD fell by 0.3% to 1.2714. USDJPY also pushed higher, adding 0.4% to 143.70.
  • Commodity currencies also closed the day weaker with USDCAD up 0.2% at 1.3183 while AUDUSD fell 1.1% to 0.668 and NZDUSD fell by 0.6% to 0.6143.


  • Weak activity data, central bank hikes, and hawkish messaging all weighed on equity markets last week, leading key indices to a weekly loss. In Asia, the Nikkei ended the week down 3.1%, coming off the multi-decade highs of the previous week. The Hang Seng ended down 5.1% w/w after a 1.7% drop on Friday, while on the mainland the Shanghai Composite lost 1.0% w/w.
  • In Europe, weak PMI data on Friday followed hawkish hikes and messaging from the BoE and ECB to see the FTSE 100 and the STOXX 600 end the week down 2.4% and 2.9% respectively.
  • In the US, all three major indices closed lower, with the S&P 500, the Dow Jones, and the NASDAQ dropping 1.8% w/w, 2.0% w/w, and 2.1% w/w respectively.
  • Local markets were a global bright spot as the DFM closed up 1.1% and the ADX added 1.5%. There was less positivity elsewhere in the region as the Tadawul and the EGX 30 dropped 0.5% w/w and 4.1% w/w respectively.


  • Oil markets appear to have taken the events in Russia over the last several days in their stride with both Brent and WTI trading up marginally after losses of near 4% last week. Brent has started the trading week up about 0.8% at USD we74.42/b while WTI is trading at USD 69.72/b, up about 0.8%.
  • There appears to be no material threat to Russia’s oil production from the political unrest, leaving markets to remain focused on tighter central bank policies and a general slowdown in economic activity.

Written By

Daniel Richards Senior Economist

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