Early Morning Call: China factory activity shrinks, sends AUD, CNY down
In China, factory activity fell to a five-month low in May.
Equity market overview
Equity markets fell overnight in Asia.
In China, factory activity fell to a five-month low in May. The NBS manufacturing PMI contracted faster than expected to 48.8 from 49.2 the previous month, and below forecasts of an increase to 49.4. Service sector activity remained in expansion territory, but came in at 54.5, the slowest pace in four months. This is yet another indication that the recovery has been uneven for the world's second largest economy.
Last month, imports contracted sharply, PPI fell, industrial profits plunged, and industrial production missed forecasts. This latest data sent Hong Kong, mainland China and Australian indices down. The Australian dollar, New Zealand dollar and yuan lost ground against the greenback.
Japan also released weaker-than-anticipated statistics overnight, weighing on its equity market. Retail sales rose 5% in April from a year earlier, missing forecasts for a 7% gain. Industrial output unexpectedly fell. 0.4% in April from the previous month. The contraction dashed economists' median market forecast for a 1.5% gain. Both domestic and overseas orders contributed to that decline.
The production of chip-making equipment was particularly affected, down 24.6%, and falling demand for smartphones and vehicle equipment affected flat panel-making equipment, down 66.6%.
Macroeconomic news
At 1pm, Germany consumer price index (CPI) is expected to slow to 6.5% in May year-on-year (YoY), a 13-month low, from 7.2% in April.
At 1.30pm Canada's first quarter (Q1) gross domestic product (GDP) is forecast to rise by 0.4% quarter-on-quarter (QoQ).
Earnings
Elsewhere on the equity market, WH Smith forecasts higher full-year profit as it bets on strong travel demand during the summer. Total group revenue for the 13-week period ended May 27 was up 23% year-on-year.
British discount retailer B&M Europe forecast higher 2024 core earnings. The group reported adjusted core profit of £573 million down 7.4% from last year. Like-for-like sales for its UK unit in the first nine weeks of the new financial year were up 8.3%.
HP fell in extended trading, after missing revenue expectations. Second quarter came in at $12.90 billion. Analysts were expecting $13.09Bln. The group's Personal Systems division, that's desktops and laptops, plummeted 29% in the period, while the company's printing segment recorded a 5% fall.
HP is not the only group in the sector going through difficult times. Global PC shipments declined nearly 30% in the first three months of the year. We are now at levels that are lower than before the pandemic. HP however expects consumer demand to be stronger in the second half of the year.
After posting a better-than-forecast earnings per share (EPS) of 80 cents in fiscal Q2, HP now expects an annual adjusted profit between $3.30 and $3.50 per share. Hewlett Packard Enterprise posted earnings of 52 cents per share, 3 cents higher than forecast. Revenue missed expectations.
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