– Adds Details For Sectors

May MNI analysts survey Apr Mar
median range
————————————————————————
Business sentiment: 106.9 109.2 108.7 – 109.9 109.9 109.8
Current conditions 113.3 117.0 116.8 – 118.0 117.5 117.4
Six-month outlook: 100.9 101.8 101.5 – 102.5 102.7 102.7
–

FRANKFURT (MNI) – Business sentiment in Germany eroded faster in
May than even the most pessimistic forecasts had suggested, as
respondents sharply revised down their assessment of both the current
situation and the near-term outlook, the Ifo institute reported
Thursday.

After five consecutive months of increases, Ifo’s business climate
indicator dropped a full three points to 106.9, its weakest result since
November.

After a modest rebound in April, the current situation component
fell 4.2 points to a 21-month low of 113.3 in May. The expectations
component also lost ground, slipping 1.8 points to 100.9, matching
February’s level.

“The recent surge in uncertainty in the Eurozone is impacting the
German economy,” said Ifo President Hans-Werner Sinn in a press release.

In the manufacturing sector, sentiment shed 4.8 points to a
five-month low of 10.6, due primarily to a sharply revised current
situation. For the first time in months, respondents reported “defensive
recruitment plans”, while expecting further stimulus from foreign
demand.

Morale in the construction sector continued trending downward,
cutting the sub-indicator by 1.2 points to -5.1, as a less optimistic
six-month outlook more than offset a slight improvement in the current
situation.

Wholesale sentiment slipped 4.7 points to 8.0 in May, its lowest
point since October. The erosion in retail morale was greater, as the
index dropped 14.3 points fall to -3.6. In both sectors, current
conditions and expectations deteriorated, Ifo reported.

While confidence in industry and trade fell back, service providers
were more optimistic, as both the current situation and expectations
recovered in May. Service companies’ hiring plans remain expansive, Ifo
noted.

The weaker Ifo headline index, while still well above the long-run
average, adds to the list of sliding sentiment indicators like the ZEW’s
investor survey and the PMI polls. This suggests the economic recovery
will lose steam in the coming months.

German GDP rebounded 0.5% in 1Q from 4Q’s 0.2% dip on the back of
improving trade and higher private consumption, which offset weaker
investment and inventory rundowns, the Federal Statistical Office
reported earlier in the day.

In its latest Monthly Report, the Bundesbank argued that “the
surprisingly strong GDP outturn probably overstates the prevailing
underlying cyclical trend and cannot simply be projected forward over
the coming quarters.”

May’s composite PMI (49.6) fell into contraction territory for the
first time in six months and only for the second time since mid-2009 on
the back of a weaker manufacturing sector. According to respondents, new
orders in both sectors suffered, though the decline in manufacturing was
far more severe, as foreign orders fell for the 11th consecutive time.

The ZEW’s latest survey showed that investors’ near-term outlook
fell to a three-month low in May following elections in Greece and
France, which respondents feared could hinder efforts to bring an end to
the ongoing debt crisis.

“The agreements made in Europe over the past six months now appear
at stake,” explained ZEW expert Michael Schroeder. He remained, however,
optimistic on German economic activity this year, projecting GDP growth
of 1.5%.

The Organisation for Economic Cooperation and Development was
slightly less optimistic, with a forecast for 1.2% GDP growth. Next year
growth could surpass its potential due to strong domestic demand, it
predicted, assessing the “substantial” risks to these projections as
broadly balanced.

“The main downside risk relates to international developments,” the
OECD said. “In particular, further stress in euro area sovereign debt
markets could weaken domestic bank balance sheets and lead to tighter
financing conditions.”

“Rising oil prices could hurt domestic demand,” the OECD continued.
“By contrast, better domestic demand prospects could make Germany more
attractive for investment and innovation in the services sectors,
especially if structural reforms in this area were to be implemented.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: M$G$$$,MT$$$$,M$X$$$,M$XDS$,MAGDS$,MTABLE]

LONDON (MNI) – The number of new mortgage approvals held steady
in April but remained at low levels, according to the latest British
Bankers’ Association data.

The data from the BBA show that the number of new mortgage
approvals rose to 32,438 after having hit an 11-month low of 31,931 in
March.

The amount of dwelling-secured lending came in at stg715 million,
down from the stg876 million seen in March. The value of loans approved
in April rose to stg5.132 billion from stg4.954 billion in March.

Commenting on the data, BBA statistics director, David Dooks said:

“Weak UK growth and eurozone uncertainty continue to undermine
business confidence, leading to continued sluggish demand for borrowing.

“The reaction to higher gross mortgage lending in March, ahead of
the removal of the stamp duty concession, was a slightly weaker figure
for households’ secured borrowing in April”.

–London Bureau; Tel: +44207862 7479; email: wwilkes@marketnews.com

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

-Q1 GDP revised down to -0.3% q/q; -0.1% y/y

LONDON (MNI) – UK economic growth was revised lower in the first
quarter of the year, as construction output fell more sharply than
initially estimated, figures released by National Statistics showed
Thursday.

The data highlight the continuing weakness in the UK economy with
household spending only just rising on the quarter and external trade
impacting negatively on growth. Without a boost from government
spending, which is supposed to be being cut, then growth would have been
far weaker.

With concerns over future growth in the Eurozone and the rest of
the world firms destocked rapidly, which slashed growth by some 0.7
percentage points on the quarter.

Overall GDP fell 0.3% between Q1 and Q2 and was down 0.1% on the
year, the largest annual fall since Q4 2009. Analysts had expected
there to be no revision to the data.

Yesterday, the Bank of England, which run its own GDP series,
suggested growth was unchanged in Q1 – although this was based on data
before today’s release.

Comments earlier in the year from a number of Monetary Policy
Committee members cast doubt on the Q1 GDP data and in particular the
weakness of construction. While some may still harbour doubts over the
reliability of the data, it is difficult to argue against the general
weakness in the economy.

The BOE’s numerical forecasts published Wednesday suggested output
will fall a further 0.2% in Q2 due to the Jubilee before bouncing back
0.8% in Q3. Still, the projections in the BOE’s May Inflation Report
slashed the central bank’s 2012 forecast nearly in half to 0.7%.

The main reason for the downward revision to Q1 growth was a well
flagged revision to construction output which fell 4.8% on the quarter
against the initially estimated 3% decline, the largest fall since Q1
2009.

Growth in the service sector and industrial production was
unrevised at 0.1% and -0.4% on the quarter respectively.

The first revision of GDP provides new information on the
expenditure side of the economy and this showed continued weakness in
the household sector, where spending was up just 0.1% on the quarter and
down 0.1% on the year.

The long awaited boost to growth from the external sector
continued to prove elusive as net trade cut GDP growth on the quarter by
0.1 percentage point.

The only positive addition to growth came from government spending,
which rose a hefty 1.6% on the quarter, the largest increase since Q1
2008, adding 0.4 percentage point to GDP growth on the quarter. This is
surprising given the backdrop of austerity as without this then GDP
would have fallen 0.7% on the quarter.

The largest negative impact on GDP in Q1 came from significant
de-stocking by firms, with the change in inventories from Q4 knocking
0.7 percentage point off growth. It seems likely that given the renewed
concerns surrounding growth in the Eurozone and the rest of the world
firms ran down stocks to meet current demand.

The movement in stocks has hit GDP by some 1.5 percentage point
over the last two quarters, the largest impact since Q1 to Q3 2008, as
the global financial crisis took hold.

National Statistics said that the largest declines in stocks
came in the mining, manufacturing and utility industries.

–London newsroom: 44 20 7862 7491; email: puglow@marketnews.com

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

UK DATA: Q1 GDP revised down to -0.3% q/q; -0.1% y/y
————————————————————————
GDP was revised down to show a fall of 0.3% q/q against the previous
estimate of a 0.2% fall – below the median for no revision. Still,
this will not come as that much of a surprise with construction output
revised down sharply. The news this quarter though is on the spending
side with household spending up a meagre 0.1% and net trade cutting
growth by 0.1pp on the quarter. In spite of “austerity” government
spending was the biggest add to GDP adding 0.4pp. But firms destocked
rapidly in what was a likely response to the poor growth outlook in the
Eurozone and rest of the world — this cut GDP by 0.7pp. Overall the
report emphasises the poor state of the economy and will raise
expectations that the BOE could do more QE soon.

1.2450 or 1.2650?

That’s ofcourse in EUR/USD.

Reasoning for choice always fab, but not obligatory.

From -0.2%, flat respectively.

Due to weaker construction output ain’t it…..

May MNI analysts survey Apr Mar
median range
————————————————————————
Business sentiment: 106.9 109.2 108.7 – 109.9 109.9 109.8
Current conditions 113.3 117.0 116.8 – 118.0 117.5 117.4
Six-month outlook: 100.9 101.8 101.5 – 102.5 102.7 102.7
–

FRANKFURT (MNI) – Business sentiment in Germany eroded faster in
May than even the most pessimistic forecasts had suggested, as
respondents sharply revised down their assessment of both the current
situation and the near-term outlook, the Ifo institute reported
Thursday.

After five consecutive months of increases, Ifo’s business climate
indicator dropped a full three points to 106.9, its weakest result since
November.

After a modest rebound in April, the current situation component
fell 4.2 points to a 21-month low of 113.3 in May. The expectations
component also lost ground, slipping 1.8 points to 100.9, matching
February’s level.

“The recent surge in uncertainty in the Eurozone is impacting the
German economy,” said Ifo President Hans-Werner Sinn in a press release.

The weaker Ifo headline index, while still well above the long-run
average, adds to the list of sliding sentiment indicators like the ZEW’s
investor survey and the PMI polls. This suggests the economic recovery
will lose steam in the coming months.

German GDP rebounded 0.5% in 1Q from 4Q’s 0.2% dip on the back of
improving trade and higher private consumption, which offset weaker
investment and inventory rundowns, the Federal Statistical Office
reported earlier in the day.

In its latest Monthly Report, the Bundesbank argued that “the
surprisingly strong GDP outturn probably overstates the prevailing
underlying cyclical trend and cannot simply be projected forward over
the coming quarters.”

May’s composite PMI (49.6) fell into contraction territory for the
first time in six months and only for the second time since mid-2009 on
the back of a weaker manufacturing sector. According to respondents, new
orders in both sectors suffered, though the decline in manufacturing was
far more severe, as foreign orders fell for the 11th consecutive time.

The ZEW’s latest survey showed that investors’ near-term outlook
fell to a three-month low in May following elections in Greece and
France, which respondents feared could hinder efforts to bring an end to
the ongoing debt crisis.

“The agreements made in Europe over the past six months now appear
at stake,” explained ZEW expert Michael Schroeder. He remained, however,
optimistic on German economic activity this year, projecting GDP growth
of 1.5%.

The Organisation for Economic Cooperation and Development was
slightly less optimistic, with a forecast for 1.2% GDP growth. Next year
growth could surpass its potential due to strong domestic demand, it
predicted, assessing the “substantial” risks to these projections as
broadly balanced.

“The main downside risk relates to international developments,” the
OECD said. “In particular, further stress in euro area sovereign debt
markets could weaken domestic bank balance sheets and lead to tighter
financing conditions.”

“Rising oil prices could hurt domestic demand,” the OECD continued.
“By contrast, better domestic demand prospects could make Germany more
attractive for investment and innovation in the services sectors,
especially if structural reforms in this area were to be implemented.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: M$G$$$,MT$$$$,M$X$$$,M$XDS$,MAGDS$,MTABLE]

Does that look much like a fence?

EUR/USD up at 1.2550 from session low 1.25155 having run into robust defence of 1.2500 barrier interest.

Sell stops reported through 1.2500 and more through 1.2480.

Speaking with Reuters

• Uncertainty due to new elections in Greece, political change in France
• Expectations for exports rose in May, giving a sign of hope
• ECB should hold rates 
• Climate, expectations in retail sector fell in May, but entertainment goods doing well due to euro 2012 soccer in June

Demonstrably weaker than Reuter’s median forecast of 109.4.

The news just keeps getting worse.

New low for EUR/USD at 1.2516. The battle for the 1.2500 barrier is well and truly on!!!

DAX and CAC 40 now down -0.4%, the early gains now just a fond memory

Elsewhere, eurozone May flash composite PMI 45.9, down from 46.7 in April, lowest read since June 2009. Whoa, whoa and thrice whoa

Up from 5.9% in March.

Dutch May business confidence -5.0 pts after -3.3 pts in April.

Down from 46.2 in April and demonstrably weaker than Reuter’s median forecast of 47.0.

EUR/USD lower, presently at 1.2545.

Barrier interest 1.2500, buy orders ahead at 1.2500/20.

Talk’s out there.

Take it for what you will.

USD/JPY at session low 79.40.

Client note came out yesterday, being carried by Bloomberg.

• Portugal, Ireland to get second aid packages
• Spain to get some form of aid after Greek exit
• ECB to cut key rate to 0.5% after Greek exit
• ECB will probably resume longer-term refinancing ops
• Sees rating cuts for Portugal, Ireland, Spain, Italy

JAPAN DATA: The index for the average land price in Japan stood at
54.2 in March this year (the March 2010 price = 100), down 3.4% from a
year earlier and marking the 21st straight year-on-year drop, the Japan
Real Estate Institute’s twice-annual survey showed. But the pace of
decline decelerated from -3.8% in September 2011, -4.1% in March 2011
and -4.3% in September 2010.

Ughh

Down sharply from April’s 46.9 and demonstrably weaker than median forecast of 47.0.

Flash services PMI 45.2, same as April. Slightly weaker than median forecast of 45.7.

FRANCE DATA: May mfg sentiment 93 vs April 95
– Below expected; MNI analysts survey median forecast 94
– Execs’ own-company outlook -4 vs April -5 (-4)
– Sector production outlook -29 vs April -14
– See MNI MainWire for details

From unrevised 95 in April.

Cable sits at 1.5682, effectively unchanged over past couple of hours.

09:30 BST (08:30 GMT) sees release of  Q1 GDP second read, expected -0.2% q/q, flat y/y.

Talk of barrier option interest down at 1.5650.  Any downward revision could well see that interest come into play.

• BOJ boosted asset buying programme boldly on April 27, now steadily proceeding with purchases
• Investor’s risk aversion biggest factor behind recent fx moves (can’t argue with that)
• No clear correlation seen historically between monetary base and yen moves
• BOJ will strive to beat deflation with current asset-buying programme