Good morning! Here’s what you need to know:
Improvement In China: Overnight, we learned China’s HSBC manufacturing PMI climbed to a four-month high of 49.7 in May from 48.1 in April.The final PMI reading for May confirmed that the economy is stabilizing, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector,” said HSBC’s Hongbin Qu. “The lack of a sustainable growth momentum warrants stronger policy support. We expect both monetary and fiscal policy to be loosened gradually over the coming months.”
Europe’s Slow Jobs Recovery: The unemployment rate in the Eurozone fell to 11.7% in April from 11.8% the month prior. “The improvement this month comes mainly from the periphery, with Portugal and Spain recording declines in the rate of joblessness; the unemployment rate was unchanged in France and Germany,” noted Pantheon Macroeconomics’ Claus Vistesen. “It is still too early to call it a trend, but … the recent improvement could be interpreted as a more decisive turning point. The unemployment rate is lagging indicator to the business cycle and we are cautiously optimistic that the recent rate of decline will be sustained in the next six-months.”
Europe’s Disinflation Problem: The Eurozone consumer price index decelerated to just 0.5% year-over-year in May from 0.7% the month prior. Core CPI slowed to 0.7% from 1.0%. This validates concerns of deflation risks rising. But it also gives the European Central Bank room to ease monetary policy further, which is what most experts expect.
Pilgrim’s Beefs Up Its Bid For Hillshire Brands: Chicken mega-producer Pilgrim’s has raised its offer for Hillshre Brands to $US55 per share, which is higher than the $US50 offered by competitor Tyson Foods last week. “Pilgrim’s anticipates run-rate cost synergies in excess of $US300 million annually to come from operational and value-chain efficiencies and, in addition, significant growth opportunities in higher margin branded products, both in North America and internationally,” said Pilgrim’s in the new statement.
$15/Hour: Seattle approved a minimum wage of $US15/hour. “Under the terms of the plan, businesses with fewer than 500 workers must raise wages to the $US15 mark in the next seven years, an increase of more than 60 per cent from Seattle’s current minimum wage of $US9.32 an hour,” reported Reuters’ Jimmy Lovaas. “Larger businesses must meet that level within three years, or four if they provide health insurance.”
Some Ugly GM Stats: From Reuters: “At least 74 people have died in General Motors cars in accidents with some key similarities to those that GM has linked to 13 deaths involving defective ignition switches, a Reuters analysis of government fatal-crash data has determined.” From Bloomberg: “General Motors Co. filed 2,004 reports on injuries and deaths stemming from accidents in cars that have been recalled for ignition-related defects, the Center for Auto Safety said.”
Here Come Car Sales: Throughout the day, the big automakers will announce their May sales figures. Analysts estimate the pace of sales increased to an annualized pace of 16.1 million in May from 15.98 million in April. “Industry surveys point to a modest gain in overall motor vehicle sales in May after they pulled back 2% in April to a 16.0 million unit annual rate following a 7% surge in March to a seven-year high of 16.3 million,” said Morgan Stanley’s Ted Wieseman. “Retail sales appear to be on pace for a stronger gain to the best pace of the year, partly offset by lower fleet sales.”
Here Come Factory Orders: Economists estimate orders increased by 0.5% in April. “Factory orders rose at a solid pace in March after being depressed between December and February,” noted Nomura economists. “Orders should rise again in April, as signaled by the increase in the advanced reading on durable goods orders.” The report will be released at 10:00 a.m. ET.
Markets Are Mixed: Stocks are in the red across Europe with Britain’s FTSE 100 down 0.4%, France’s CAC 40 down 0.1%, and Germany’s DAX down 0.2%. Asia closed higher with Japan’s Nikkei climbing o.6% and Hong Kong’s Hang Seng up 0.9%. U.S. futures are modestly lower.
PIMCO Continues To Bleed Funds: According to new data from Morningstar, PIMCO’s flagship Total Return Fund saw $4.29 billion in net outflows in May. This marks the 13th straight month of outflows for the fund managed by Bill Gross, bringing the cumulative total net outflow amount to $US59.55 billion. However, a PIMCO spokesperson told Business Insider that the fund outperformed 79% of its competitors during the month.