From 21.4 % in February. Not entirely unexpected… 

-Adds Detail To Version Transmitted At 0835 GMT
-UK May CIPS Services PMI 53.3; Unchanged Versus April – Markit/Reuters
-UK May CIPS All Sector PMI 52.3 in May; At Six-Month Low

LONDON (MNI) – The UK services sector posted firm growth in May,
fueling doubts that the Bank of England’s Monetary Policy Committee will
be pushed into providing further stimulus in its midday decision.

The headline May services PMI came in unchanged at 53.3, above
analysts’ median forecast for a 52.5 outturn and well above the 50
contraction/expansion level. The Bank of England was handed this data
last week, allowing the Monetary Policy Committee plenty of time to
discuss it ahead of Thursday’s 1100 GMT policy decision.

The all-sector PMI – which is a weighted average of the
output/activity balances from the May PMI trilogy of construction,
manufacturing and services – dropped to a six-month low of 52.3 in May,
but still clearly in expansionary mode.

The CIPS services data follow May’s manufacturing index which saw
the second steepest monthly fall in its history, which plunged deep into
contractionary territory at 45.9. That data was widely cited as raising
the chances of further easing from the MPC, with analysts stressing the
key was whether the dominant services sector followed manufacturing
down.

The details of the May services survey were encouraging.

Markit said incoming new business accelerated while service sector
employment rose at a solid rate, although business confidence fell to a
five-month low. Nevertheless, exactly half of survey respondents said
they had positive expectations for the year ahead.

There was evidence of easing inflation pressure. Average output
charges fell in May for the first time in three months while input cost
inflation hit its lowest level since October 2009.

“Reasonable growth of the UK service sector was registered in May
and there is some encouragement for near-term expansion given the
continuation of solid new business gains,” Paul Smith, Senior Economist
at Markit, said.

–London newsroom 0044 207 862 7491; email: drobinson@marketnews.com

[TOPICS: M$BDS$,MABDS$,M$B$$$]

PARIS (MNI) – France’s entrepreneurs have become more pessimistic
about economic prospects and few believe the new government can turn
things around, according to a survey released Thursday.

The improvement in prospects seen in 1Q have been undermined by
uncertainty over the future of the Eurozone and the stagnation of
domestic activity, explained the pollster Viavoice.

Moreover, doubts about the new government’s ability to renegotiate
the EU fiscal pact and finance upcoming reforms of pensions, salaries
and care for the elderly “create great scepticism,” it said.

On the positive side, the survey of over 500 firms with five or
more employees, conducted in the second half of May, showed that 59% of
executives remained confident in their own businesses; but this was down
from 70% in a comparable survey in February. The erosion in confidence
concerned turnover (down 9 points to 57%), cash flow (down 6 points to
56%) and hiring plans.

As for the domestic economy as a whole, only 24% said they remained
confident, down from 38% in February. Hopes for growth fell to 18% from
23% and for employment to 12% from 17%.

Only 30% of the business leaders believed the new Socialist
government would be able to bolster growth and only 26% that President
Francois Hollande would succeed in renegotiating the fiscal pact. Some
85% doubted that public finances could be brought into balance by 2017.

Viavoice highlighted “a mistrust of the leftist majority”
associated with government spending and ties to trade unions and “a more
general mistrust of the capacity of public authorities after four years
of crisis, which have already torpedoed many initiatives and greatly
limited the leeway for maneuver.”

–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com

[TOPICS: M$F$$$,M$X$$$,MGX$$$]

BERLIN (MNI) – German Chancellor Angela Merkel’s center-right
CDU/CSU bloc has stepped up pressure on Spain to apply for financial aid
from the European bailout fund EFSF in order to prop up its ailing
banks.

“Each day that Madrid waits longer makes this thing more expensive
for all of us,” Michael Meister, the deputy leader of the CDU/CSU
parliamentary group, told the German daily Rheinische Post in an
interview published Thursday.

“If Spain does not make a request for aid quickly, it will only
have to be much bigger in a couple of weeks,” Meister warned.

On Wednesday, Volker Kauder, the CDU/CSU’s parliamentary leader,
called on Spain to apply for financial aid: “I do think that Spain needs
to tap the rescue fund – not because of its state [finances] but because
of its banks.”

The government on Wednesday said the European bailout funds were
ready to support Spain if the country applies for aid and accepts the
conditions tied to it.

Germany again reaffirmed its stance that the European temporary
rescue fund EFSF and the planned permanent ESM can lend only to states
and not directly to banks.

“The principles are clear, the request must come from a
government,” spokesman Steffen Seibert said at a regular press
conference here. “This government will then be liable and accepts the
conditions tied to getting the aid.”

These conditions could be “specific for the concerned banks, which
get aid, or possibly for the whole financial sector of the country that
gets aid,” he explained.

Seibert said if the Spanish government decides to request aid “then
the European instruments are ready under the described terms.”

The German weekly Der Spiegel reported over the weekend that Merkel
and Finance Minister Wolfgang Schaeuble had also urged Spain to apply
for financial aid from the EFSF, yet the Spanish government had resisted
this demand.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: M$X$$$,MGX$$$,M$$CR$,M$S$$$,M$G$$$,MT$$$$]

Out of a targeted Eur 1- 2 bln

Sold Eur 638 mln of  3.3% 2014 BONO, cover 4.26 (from 3.29), 4.335% (from 3.463%)

Sold Eur 825 mln of 4.25% 2016 BONO, cover 2.56 (from 2.46), yield 5.353% ( from 4.319%)

Sold Eur 611 mln  of 5.85% 202 Obligacion, cover 3.29 (from 2.42), yield 6.044% (from 5.743%)

Strong cover and a full take up , but paid up on yields  on all three

-UK May CIPS Services PMI 53.3; Unchanged Versus April – Markit/Reuters

LONDON (MNI) – The UK services sector posted firm growth in May,
fueling doubts that the Bank of England’s Monetary Policy Committee will
be pushed into providing further stimulus in its midday decision.

The headline May services PMI came in unchanged at 53.3, above
analysts’ median forecast for a 52.5 outturn and well above the 50
contraction/expansion level. The Bank of England was handed this data
last week, allowing the Monetary Policy Committee plenty of time to
factor it into Thursday’s 1100 GMT policy decision.

The CIPS services data follow May’s manufacturing index which saw
the second steepest monthly fall in its history, which plunged deep into
contractionary territory at 45.9. That data was widely cited as raising
the chances of further easing from the MPC, with analysts stressing the
key was whether the dominant services sector followed manufacturing
down.

–London newsroom 0044 207 862 7491; email: drobinson@marketnews.com

[TOPICS: M$BDS$,MABDS$]

…from 53.3 in April, and above market expectations of a slowdown. New business index rose 54.8 in May , highest since January,

May well prove a dampener for those looking for further QE today.

Cable’s steady moving higher to the  1.5470′s from around 1.5450

On the flip side  there’s also talk of Asian sovereigns and  Middle Eastern buying interest keeping the range intact for now…

Eur’s currently around 1.2553

They have entered a long posiiton at 1.2559 with a stop at 1.2447, targeting 1.2750 over the next week and a half, reflecting their view that short term optimism and a short  squeeze is forthcoming.

EUR’s  presently at 1.2550

BERLIN (MNI) – German Chancellor Angela Merkel on Thursday
reiterated her call for a deeper European integration over the medium
term.

“We do not only need a currency union, but we also need a so-called
fiscal union, that is, more joint budget policies,” Merkel told German
ARD public television.

“And most of all we also need a political union, that is, we must
step by step hand over competence to Europe and give Europe more
controls,” the chancellor explained.

Merkel cautioned, though, not to expect too much from the EU summit
at the end of the month.

“I don’t believe there will be one single summit that will make a
big breakthough,” she explained. “But what we have been doing for some
time, and for which a working plan will certainly be presented in June,
is to say we need more Europe.”

Last month EU leaders asked the heads of the European Council, the
Commission, the Eurogroup and the European Central Bank to look into
ways to achieve economic integration among EU and Eurozone member
states. More details of the plan are to be unveiled by EU leaders when
they meet in Brussels on June 28 and 29.

–Berlin bureau: +49 30 22 62 05 80; email: twidder@marketnews.com

[TOPICS: M$X$$$,MGX$$$,M$$CR$,M$G$$$]

From 2.4% in April, and below consensus of 2.3%

• UK will require safeguards if Eurozone sets up a banking union, won’t be part of it
• Euro area has to decide on assistance for Spanish banks
• Solution to Spanish banking crisis won’t solve the Euro’s instability
• Spain’s banks need to be recapitalized now
• UK faces one of the most challenging times in its economic history.

-May House Prices Up 0.5% m/m; -0.1% y/y; Mar-May Prices Up 0.8% 3m/3m

LONDON (MNI) – House prices in May recovered some of the ground
they lost in April and were near flat on the year, according to the
Halifax house price index.

House prices rose 0.5% on the month to stand down just 0.1% on the
year, having fallen 2.3% on the month in April. The data continue the
recent pattern in house price surveys of volatile monthly movements and
mild price deflation on a yearly basis.

The rival Nationwide house price survey showed house prices up 0.3%
on the month in May and down 0.7% on the year.

In the three months through May house prices were up 0.8% on the
previous quarter.

Halifax housing economist Martin Ellis says he expects the trend of
broadly flat house prices to continue.

“We expect this situation to continue with prices likely to still
be around today’s levels at the end of 2012 as the ongoing tough
economic environment constrains housing demand,” he said.

“Recent monthly house sales figures have clearly been affected by
the ending of the stamp duty holiday for first-time buyers in late
March. Overall, the trend for sales – like that for prices – appears to
be one of broad stability,” Ellis added.

-London newsroom: 44207 862 7491; email drobinson@marketnews.com

[TOPICS: M$B$$$,MABDA$,MABDS$]

 Slightly below Reuters forecast of +0.1% and -0.9% ,  previously +0.1 m/m and y/y unchanged from April.

Guess for lack of something better to do market will target these and we nudged a session low of 1.2540 just a short while ago.

There’s a large (E500) 1.2525 expiry today as well which may help to contain  a tight range this morning…. famous last words!

EUR’s around 1.2546

– See Separate Tables for Details

TOKYO (MNI) – Economists expect slower near-term growth in Japan
but still foresee above 2% GDP rise in fiscal 2012 while projecting only
a gradual recovery in consumer prices, the latest monthly survey by the
Japan Center for Economic Research released on Thursday showed.

The association polled 40 economists and research institutes from
May 25 to June 1 for its ESP Forecast Survey, and 40 answered on the
growth and inflation outlook and 38 on the BOJ’s monetary policy stance.

The previous survey was conducted from Apr. 26 to May 8.

In the near term, economists expect GDP for the April-June quarter
of 2012 to post an annualized gain of a real 1.89%, an downward revision
from their previous average forecast for a 2.19% rise.

Amid global economic and financial uncertainties, the average GDP
forecast for the July-September quarter was also revised down to +1.88%
from +2.20% in the previous survey.

But for fiscal 2012 ending March 31, 2013, economists on average
forecast GDP will grow 2.27%, revised up from +2.15% forecast in the
previous survey.

Economists on average project a 1.50% rise in GDP in fiscal 2013,
revised down slightly from +1.52% projected the previous month.

The survey showed that the average forecast for core CPI (excluding
perishables) in fiscal 2012 was for +0.11%, up from 0.09% in the
previous survey. It would be the first annual increase in four years
since +1.2% in fiscal 2008.

Economists on average expect consumer prices to show a 0.20% rise
in fiscal 2013, unchanged from the previous month.

The forecasts showed that consumer price rises for the next two
years will remain far below the Bank of Japan’s longer-term goal of
achieving 1% annual inflation.

The survey also showed that 29 economists predict further monetary
easing by the Bank of Japan in coming months, mostly in July, up sharply
from 23 last month.

Meanwhile, nine economists expect the BOJ to start unwinding its
monetary easing in about a year ahead, down from 15 in the previous
survey.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MMJBJ$]

FTSE100 up around 0.4%, Dax up 0.3%, CAC 40  and IBEX up 0.5%

Italy’s FTSE MIB the only one in the red, down around -0.1%

-0.1%y/y for 3 months  to May

In line with Reuters consensus

Sitting around 1.2565 when i crawled out of bed and market looking like its in hold mode ahead of this mornings  Spanish( 0830GMT)  and  French  (0900 GMT) auctions, with results expected shortly after.

EUR’s trading a 1.2550/70 range in early Europe with  bids seen down around 1.2520/30 and  offers up around 1.2585/95,  buy stops up through 1.2600 initially and then 1.2625.

Haven’t heard any flow information as yet, but will keep you in touch

JAPAN DATA: The latest monthly ESP Forecast Survey by the Japan Center
for Economic Research shows average economist forecasts for growth and
inflation:
Jun survey May survey
– Real GDP +2.27% in FY2012 vs +2.15%
– Real GDP +1.50% in FY2013 vs +1.52%
– Core CPI +0.11% in FY2012 vs +0.09%
– Core CPI +0.20% in FY2013 vs +0.20%