HSBC's China

0240 GMT [Dow Jones] HSBC's China PMI, a competing measure to the official PMI which is better regarded by many analysts, declined to 48.4 in May, compared to 49.3 in April and an earlier preliminary reading of 48.7. The series has been in contractionary territory below 50 for seven straight months, in contrast to the official CFLP PMI, which posted a rise to 53.3 in April before falling to 50.4 in May. The April CFLP PMI reading has been widely viewed with suspicion in markets, as other April data was weak across-the-board. In a note on Thursday, Capital Economics said the HSBC PMI is more reliable due to better seasonal adjustment and a higher sampling of small, private-sector firms. The HSBC index "is more representative of the manufacturing sector as a whole," Capital Economics said. "It is also independent of official control." (aaron.back@dowjones.com) 

China official May PMI drops sharply to 50.4 from 53.3 in April

-- Currencies in Asia-Pacific region fall on weak data
-- Economists says economy will bottom out in the second quarter
BEIJING -- China's official Purchasing Managers Index fell significantly to 50.4 in May from April's 53.3, showing an accelerated slowdown in the world's second-largest economy that calls for more stimulus policies.
The gauge for nationwide manufacturing activity was also lower than the median forecast of 51.5 from 10 economists polled by Dow Jones Newswires. Nine out of the 10 economists predicted a higher PMI than the real figure.
A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 indicates contraction.
After the weak data was announced, the Australian dollar fell to 0.9644 against the U.S dollar, its lowest level since Oct. 5, 2011. Other regional currencies including the New Zealand dollar and Singapore dollar were all lower because of the China PMI.
Due to weak overseas demand and domestic investment, China's economic growth will likely bottom out in the second quarter, before Beijing's supportive policies begin to take effect in the second half of the year, economists said.
"As risks of a hard landing have increased, Beijing should issue more policies to stabilize economic growth," said Li Huiyong, an economist at Shenyin & Wanguo Securities.
"The quicker interest rates are cut the better," he said.
Meanwhile, Standard Chartered economist Li Wei expressed some skepticism at the big drop in the PMI. The high April figure is suspect given that other data were weak across the board that month, and flawed seasonal adjustment methods may be the culprit, Li said.
"I think the slowdown is all being reflected in May, so I'm a little bit concerned about some over-correction in the data," he said.
Nonetheless, Li said there is no doubt underlying economic conditions are weak and economic data may not begin to reflect the stimulus until August or September.
-Liu Li and Aaron Back contributed to this article, Dow Jones Newswires; 8610-8400-7713; li.liu@dowjones.com

(END) Dow Jones Newswires
May 31, 2012 21:35 ET (01:35 GMT)

END) Dow Jones Newswires May 31, 2012 22:19 ET (02:19 GMT)

0219 GMT [Dow Jones] Korea government bonds are higher, helped by continued risk aversion amid worries over the euro zone debt crisis, while data tips weaker growth in China and the U.S. "Yields of local bonds, like those on U.S. Treasurys, are already trading at very low levels, but there is no clear momentum yet to revive risk appetite in the market," says Kim Se-hun, a fixed-income analyst at Daishin Securities. "The bullish run for local bonds is expected to continue in June. The three-year yield may fall near the BOK's policy rate of 3.25%" in the near term, he adds. The three-year yield is down 2 bps at 3.30%, the five-year yield is down 3 bps at 3.40% and the one-year yield is down 4 bps at 3.65%. Lead June bond futures are up nine ticks at 104.74. 

Daily Forex Brief London: Thursday 31st May 2012

Dollars, yen and G4 bonds smell of roses

More blood on the streets of financial markets yesterday and overnight, with risk assets reversing still further and safe haven currencies and bonds smelling like roses. Interestingly, while the dollar remained very much in favour and money poured into US treasuries, it was actually the Japanese yen that shone even more brightly. Indeed, USD/JPY is now below 79, which no doubt will both alarm and disappoint Tokyo in equal measure. Although bond yields for Europe's fiscal miscreants soared, the price action in the single currency was more measured, as it drifted gradually down below 1.24, a fresh 2yr low. High-beta currencies such as the Aussie fared worse –it fell below the 0.97 level overnight. In general, May has been a dreadful month for emerging currencies – for instance, the likes of the Russian ruble and the Polish zloty have suffered a 10% decline thus far, while the Indian rupee has dropped to a record low. Likewise, commodities have been hard hit – Brent crude fell to USD 103.34 overnight, down more than 3% over the past 24 hours, while the copper price lost another 2.5%.

Daily Forex Brief London: Wednesday 30th May 2012

Stay away in May

Assets prices were not unlike a volcano yesterday – all quiet on top, but a bubbling cauldron of fire and friction underneath. Although most now accept that the end is nigh for Greece in terms of continuing participation in the eurozone, events in Spain are moving so incredibly quickly that the centre of global systemic risk has now shifted indelibly to Madrid. Yesterday's news that retail sales in Spain collapsed by 16% in real terms in the year to April confirmed that this is another European economy in freefall. Almost everywhere you look in southern Europe the news is disturbing. Unsurprisingly, confidence in the single currency continues to ebb away; the euro dropped to a new 2yr low of 1.2457 overnight. In the month of May alone, the euro has fallen by almost 6%. Once more it is the dollar and the yen that are winning the forex popularity contest, while G4 bonds continue to set new record lows in yield. Gold is still really struggling (see below for a more detailed discussion) – it fell to USD 1,545 overnight. Oil prices are still plunging, providing further evidence that global demand has waned markedly in the current quarter. Brent crude fell below USD 107 last night, a fall of almost USD 20 in less than two months. That old investment adage 'sell in May and go away' has once again been remarkably prescient.