I'm not in the habit of copy and pasting, but there's simply too much data and it will take too long to write it all out, so here's what happened in the EU overnight... I will bold the very important parts that you should take note of.
First we got French and German PMIs which were nothing short of abysmal: the France Services PMI fell to 46.4, or in fresh contraction territory from March's 50.1, a 6-month low, even as the Manufacturing PMI remained virtually unchanged at 47.3 compared to 46.7 in March. All this of course adds insult to last night's Hollade victory injury for capital markets which certainly are not happy with the forthcoming change. But if France was ugly, Germany was downright abysmal with the composite PMI back down to 50.9 from 51.6 in March, dragged down by the Manufacturing PMI which hit a 33-month low of 46.3 (from 48.4 in March)! But, but, the Ifo and Zew... The end result- Eurozone April Manufacturing PMI slumped to 46 vs 48.1 Est. while the Services PMI dropped to 47.9 vs 49.3 est, with the Employment Index sliding to 48.3 fro 49.2 in Marc - the lowest since Feb 2010. In short, the quadruple dip didn't take long. But wait there's more: the Italian Consumer Confidence number printed at 89 the lowest since the series began in 1996, falling to 89.0 from a revised 96.3. Did we say falling, we meant imploding. But wait there's more. The Bank of Spain just announced that Spanish GDP fell 0.4% in Q1, confirming that the country has entered into a recession. But wait there's more. Eurostat just reported that Euro Zone govt debt-to-GDP ratio rose to a record 87.2% in 2011 from 2010's 85.3% revised from 85.4%; there was a silver lining - the deficit narrowed to 4.1% of GDP v 6.2%, yet exchanging record debt for a modest drop in deficits is hardly equitable. But wait there's more. As of minutes ago, the Dutch Cabinet and PM has formally offered its resignation to the queen, on the backdrop of this weekend's stunning news, which in turn means that the country's AAA rating is about to be slashed as first Citi and then the rating agencies warned, confirming that the contagion has spread not only to Spain and Italy (whose banks are about to be serially halted) but the core once again.
Yet while a lot of the above is noise, the big issue is that the European growth dynamo, Germany, has now definitively stalled.
Our equity Bloomberg screens are bright red, as equity markets sell off across the globe. Several reasons are contributing to the market selloff: 1) several firms in Asia posted weaker-than-expected earnings, 2) worries that Europe's debt crisis still threatens global growth, 3) the French elections, and 4) a breakdown of budget talks in the Netherlands.
After seven weeks of negotiations, the Dutch government failed to reach an agreement on budget savings of €10-15bn. That is needed to reduce the budget deficit from 4.6% in 2011 to the maximum 3% deficit rule for Europe by the end of 2013. Failure to reach agreement on reining in the budget deficit would be marginally pro-growth; however, it raises the risk that the country loses its AAA credit rating.
The HSBC flash manufacturing PMI for China remained in contractionary territory, at 49.1, in April. In March, the index stood at 48.3, indicating that the pace of contraction was slowing. Markets tend to focus less on the HSBC flash PMI report and give more weight to the official release issued later, on the first of every month. The official measure remains firmly in expansion territory, at 53.1.
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