SHANGHAI, July 3 (SMM) - Manufacturing activities in China, Euro zone and the US staged contractions in June according to the manufacturing data released overnight, suggesting a dismal state of global recovery and triggering market concerns over metal demand.
Data from China Federation of Logistics & Purchasing showed China’s June PMI dropped to 50.2 from 50.4 in May, and hit its lowest level since last November, implying the necessity of allowing more accommodative policies before the slowdown in the world’s second largest economy hits the bottom. Meanwhile, HSBC China PMI also retreated in June to 48.2 from 48.4 recorded in May, reflecting an eighth straight month of contraction and compounding concerns over further slowing and a hard landing in China. Given the weak external demand and the unimproved domestic demand despite loosening measures introduced earlier, China’s economy is still under downward pressures.
ISM manufacturing report for June showed ISM manufacturing index slipped to 49.7 from 53.5 in May, in the first reading below the 50 line indicating expansion or contraction since July 2009, pointing to a deteriorating U.S. economy. A survey released July 2 by Markit showed final reading for Euro zone manufacturing PMI in June was 45.1, lower than the expected 44.8. Even Germany, the region's growth engine, is showing signs of softening. Germany’s June manufacturing PMI was 45.0, representing the biggest shrink of its manufacturing sector in three years, and new business activities slipped for the 12th month in a row. The country is now plagued by double whammy of the European debt crisis and global economic downturn.
Although Euro zone leaders agreed last week that rescue funds could be used in a flexibly to lower government borrowing costs, Finland and the Netherlands indicated opposition for the Euro zone's permanent bailout fund to buy government bonds in the secondary market, casting doubt on the deal reached by EU leaders last Friday. However, the deal is expected to pave way for more monetary easing by the ECB, so risk appetite may be promoted so long as the measures proposed at the summit are put into practice, and metal markets should continue to fluctuate before the implementation of the measures.