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The Guardian - UK
The Guardian - UK
Business
Nick Fletcher

Markets shrug off trade war fears and Spanish vote as US jobs beat forecasts - as it happened

A steel distribution factory in Monterrey in northern Mexico.
A steel distribution factory in Monterrey in northern Mexico. Photograph: Julio Aguilar/AFP/Getty Images

Summary: Italy's coalition outweighs trade fears for investors

Investors pretty much knew that the US was about to slap steel and aluminium tariffs on the EU, Mexico and Canada, so in true market fashion, it was sell on the rumour and buy on the fact.

The EU however said it was pressing ahead with a complaint to the World Trade Organisation about the US move, and had also opened a challenge against China over intellectual property.

News that a week of political turmoil in Italy had ended with a new coalition government also helped sentiment, while the no confidence vote in Spain’s (now ex) prime minister Rajoy was helped by the fact that a new euro-friendly administration was in place almost immediately.

So markets are ending the week on a positive note, with Italy’s FTSE MIB up 2.53%, Spain’s Ibex 1.83% better and Germany’s Dax ahead by 1.4%. In the UK the FTSE 100 is 0.5% higher, while on Wall Street the Dow Jones Industrial Average has climbed 221 points or 0.9%.

On the economic front, the US created more jobs than expected in May, something previewed by a Trump tweet ahead of the official release.

In Europe, eurozone manufacturing fell to a 15 month low. In the UK, however, the latest manufacturing PMI survey came in slightly betteer than expected, although the recovery was said to be unconvincing.

On that note it’s time to close for the week. Thanks for all your comments, and we’ll be back on Monday.

US manufacturing dips marginally in May

US factories grew strongly again last month, but slightly more slowly than expected.

The final Markit manufacturing PMI came in at 56.4 compared to the intial estimate of 56.6 and April’s figure of 56.5.

White House economic adviser Larry Kudlow has spoken about the Trump tweet on the jobs figures:

Wall Street opens higher

Despite the growing trade tensions after the US imposed its tariffs on the EU, Canada and Mexico, Wall Street has followed European markets higher, helped by a better than expected jobs figure.

The Dow Jones Industrial Average is currently up 210 points or 0.86% while the S&P 500 opened up 0.5% and the Nasdaq Composite was 0.6% higher.

Here is our story on the US jobs data, and the president commenting on the figures before their official release:

Donald Trump broke with years of protocol on Friday, commenting on the US’s latest jobs report an hour before its official release.

The Bureau of Labor Statistics announced at 8.30am that the US had added 223,000 new jobs in May as the unemployment rate slid t0 3.8%, its lowest level since April 2000 and one of the lowest levels since after the second world war.

Trump, who has taken credit for job market growth despite the fact that it began under Obama, said on Twitter he was looking forward to the release of the monthly jobs report just over an hour ahead of its release.

Following his tweet, treasury yields moved sharply higher. The monthly report is one of the most market sensitive pieces of economic information released by the government and is carefully guarded ahead of its release.

For anyone other than the president, the comment would likely lead to an investigation or likely firing. The report is given to senior White House officials the day before its release but is usually closely protected.

Jason Furman, chairman of the Council of Economic Advisers under Obama, said Trump should never again be given sight of the figures before their release.

Our full story is here:

And more Trump. The president has turned his attention back to trade, and Canada:

Former US treasury secretary Summers has strong views on the Trump tweet which came ahead of the official announcement of the jobs numbers:

More from ING Bank. Economist James Smith says the jobs data means a June rate hike is still on the cards. He said:

Rising employment and an above-consensus wage growth figure will reinforce expectations for a rate rise in a couple of weeks, although Fed voters will also have a firm eye on the latest trade developments.

President Trump said shortly before today’s US jobs report that he was “looking forward” to seeing the numbers. And with the economy having added 223k jobs in May, he is likely to be fairly chuffed.

The unemployment rate fell to 3.8%, a new post-crisis low, and in fact came within spitting distance of 3.7% once rounding is taken into consideration. This decline came as almost 300,000 job hunters found employment in May according to the household survey.

But for the Fed, the key positive in this month’s report is that wage growth beat estimates, taking the year-on-year rate back up to 2.7%. This comes as firms appear to be finding it harder to fill positions. The proportion of small businesses finding it hard to fill job openings continues to flirt with all-time highs, while it’s taking around twice as long to fill vacancies than it did during depths of the financial crisis. We think wage growth could test 3% again this year as these skill shortages gradually filter through to the official numbers.

All of this means that a rate hike is still highly likely from the Fed in a couple of weeks’ time. Our base case is that the committee will hike a further two times after that in 2018, although of course there’s no doubt that Fed officials will be keeping a firm eye on the brewing global trade war, and this is the main risk to our view.

As far as the jobs numbers are concerned, we suspect it is probably too early to see the effect of Trump’s metal tariffs in this month’s data, but things could start to look a little more concerning over coming months.

There are reportedly only around 300,000 workers directly employed in both the steel and aluminium production industries. By comparison, some estimates have put the number of jobs in companies reliant on steel/aluminium inputs at around 6.5 million – in industries covering aircraft to beer cans. On this basis, the risks stemming from the metals tariffs are likely to be a net negative for the overall jobs market.

Here’s ING strategist Viraj Patel on the US jobs numbers:

The US unemployment rate has fallen to a new 18 year low of 3.8%, slightly better than the 3.9% expected.

nonfarmjune

Updated

April’s jobs figure was revised down from 164,000 - already weak - to 159,000 but March was higher than originally reported, up from 135,000 to 155,000.

On the wages front, year on year earnings were up 2.7% compared to 2.6% in April, in line with forecasts.

Month on month, wages grew by 0.3%, a little higher than the expected 0.2%.

Updated

US jobs data beats forecasts

Perhaps no surprise given Trump’s positive tweet, but the US jobs figures are much better than expected.

Some 223,000 jobs were created in May compared to expectations of a 190,000 increase.

Updated

US playing a very dangerous game here, says EU

Back with the EC, and commissioner Malmstrom says we are not in a trade war yet but in a very difficult situation brought on by the US. It is a very worrying situation, she says, it could escalate and the economic recovery risks being diminished by this. “ The US is playing a dangerous game here.”

Updated

Trump tweets on jobs figures ahead of release

Meanwhile, on the US jobs data which is due shortly, President Trump has tweeted about them ahead of time:

Updated

On the US tariffs, she says the EU is talking to Canada, Mexico, as well as Japan. There might be others as well who will react.

EU making complaint at WTO against China too

Malmstrom says the WTO| complaint about the US tariff will be made in the next few days, and the EU is also making a challenge against China on intellectual property. She says:

We are not choosing any sides. We are determined to deal with the root causes of the current tension in the trade system. But we need to do that within the rules.

Updated

European Commission press conference begins

Here’s a link to the European Commission press conference by Commissioner Cecilia Malmstrom on the response to the US tariffs.

Malmstrom
Malmstrom Photograph: European Commission

Updated

Here’s Liberal Democrat leader Sir Vince Cable on the US tariffs, courtesty PA:

As well as being petty and most probably illegal, Trump’s trade war is ultimately self-defeating.

In the inevitable retaliation, there will end up being tariffs on a plethora of US products from jeans to Trump Tower merchandise.

This shows how absurd it is for the likes of [UK international trade secretary Liam] Fox to pin their hopes on - and entrust our economic future to - a bilateral trade deal with the US.

We know he’s illogical and stubborn, but he claims to be a good businessman. Trump must back down.

Following the news of the US move, Fox had told Sky News the tariffs were “patently absurd” but said they would not affect a post-Brexit trade deal between the US and UK. He said:

The US administration has made clear again this week that they are very keen to see an agreement with the UK but regard steel imports as an EU issue.

The European Union is pressing ahead with its retaliation to the US trade tariffs:

The EU is opening a case at the World Trade Organisation, after the US imposition of a 25% duty on European steel and a 10% duty on European aluminium came into force this morning. Cecilia Malmström, the EU trade commissioner, is also expected to announce retaliatory tariffs on classic American products, such as Levi’s jeans, bourbon whiskey, cranberries and peanut butter, at a press conference later on Friday.

“The European Union will today proceed with the WTO dispute settlement case adding those additional duties on a number of imports from the United States,” Federica Mogherini, the EU high representative on foreign policy, told journalists this morning. “The European Union measures will be reasonable, proportionate and in full compliance with WTO rules and obligations.”

She was the latest European politician to hit back at the US decision, which has was described by President Emmanuel Macron of France as a “mistake” and the international trade secretary, Liam Fox, as “patently absurd”.

Speaking on Friday morning, Germany’s economy minister Peter Altmaier said he hoped that a decisive response from the EU would prompt the US president to think again. “We hope that the European response will result in a process of reflection in the USA,” Altmaier told German broadcaster ARD, adding that the EU may look to work with Mexico and Canada on trade, also hit by the new tariffs.

Bernd Lange, the German socialist MEP who chairs the European parliament’s international trade committee, said the tariffs were “illegal” and insisted the EU would “make some countermeasures, no doubt about”. He said: “We chose also some symbolic products like Harley-Davidson to make clear here is a red card.”

Here is the full story:

Markets so far continue to be fairly relaxed about the prospect of a global trade war, and the ousting of Mariano Rajoy as Spanish prime minister. The resolution of the turmoil in Italian politics certainly seems to be helping sentiment, with Italy’s FTSE MIB now up 2.5%.

Elsewhere Spain’s Ibex is up 1.77% following the vote against Rajoy, Germany’s Dax has risen 0.9% and France’s Cac has climbed 1.24%. In the UK, the FTSE 100 is 0.65% better. On Wall Street, the Dow Jones Industrial Average is forecast to open nearly 120 points higher. Craig Erlam, senior market analyst at Oanda said:

The imposition of steel and aluminium tariffs by the US on Europe, Canada and Mexico has drawn plenty of criticism from officials but maybe in a sign of how markets can become less sensitive to certain issues, the response has so far been fairly muted. Focus will now be on the retaliatory measures that these countries have lined up and whether that in turn triggers a larger and quite unnecessary trade war. Investors currently appear at ease with the situation but that could quickly change.

And a handy guide to the potential global trade war from ING Bank:

Here’s a US Federal Reserve member on the trade tariffs:

The voting in Spain by the way showed 180 in favour of ousting prime minister Rajoy, 169 against, and one abstention.

The Spanish vote has had less impact than the turmoil in Italy, says Seema Shah, global investment strategist at Principal Global Investors:

Much of the market panic around Italy was about the threat to its membership of the Euro area but, by contrast, all of the main Spanish political parties are supportive of the single currency. Presuming Sanchez does not try to hang on to power, Spain is likely to see new elections later this year and a market-friendly, pro-European government should materialise from there. In the meantime, given that the support of Basque nationalist MPs required a promise to not change the budget, Sanchez is unlikely to make sweeping changes to the budget.

Material economic progress has been made in recent years - Spain’s fiscal position has improved; unemployment has fallen; and the banking system has been strengthened - the latest political disruption does not upset the generally positive outlook for the Spanish economy. Of course, political uncertainty is never welcome, but it has been telling that Spanish bond yields have fallen again today. It seems that Italian politics are more important for Spanish markets than Spanish politics.

Here is Sanchez receiving the applause after becoming prime minister elect:

spain1june

Rajoy ousted as Spanish prime minister

Updated

The confidence vote is underway in Spain and here’s a link:

Here’s a quick summary of some of the day’s PMIs:

Updated

Back with UK manufacturing, and despite the unconvincing outlook, ING Bank economist James Smith believes the Bank of England is still inclined to raise interest rates this summer:

At 54.4, the latest UK manufacturing PMI is a little better than hoped but is still a far cry from the levels seen towards the end of last year.

Whilst Markit/CIPS noted the weakness partly reflected a slower pace of domestic orders, we also wonder whether the steadier global growth over the past few months is starting to weigh. We suspect it is too early to see any tariff impact in these figures, but the slowdown in the Eurozone that we saw through the first quarter may be playing a role. The gradual strengthening in the trade-weighted pound since last summer could also be beginning to hit demand at the margin.

Of course, the UK’s manufacturing sector only makes up around 10% of the economy, so we suspect the Bank of England will be paying closer attention to next week’s services index as it tries to gauge whether growth is rebounding after the weaker first quarter.

After a couple of months of dismal weather, May finally saw the sun come out and this should have given the struggling high street a much needed boost. That said...we think consumer-facing sectors are not out of the woods just yet. Households remain cautious in the face of rising petrol prices, stagnant real wages, as well as economic uncertainty more generally.

For that reason, a rate hike over the summer is still far from guaranteed. However our feeling from recent Bank of England commentary is that the committee has a preference to hike rates sooner rather than later if the data allows, in part to combat the risk of rising wage growth and underlying inflation.

Earlier we also had the German manufacturing PMI:

The Spanish confidence vote is due in around 15 minutes (10am BST), and it seems Mariano Rajoy is resigned to leaving, with socialist Pedro Sanchez set to take over as prime minister.

UK manufacturing sector beats expectations but recovery not convincing

British factory growth was stronger than expected in May, according to a survey of the sector, but the increase masks its underlying weakness.

The Markit/CIPS manufacturing PMI came in at 54.4, up from 53.9 in April and above expectations of a figure of 53.5.

Markit director Rob Dobson said:

At first glance the mild acceleration in the rate of output growth and rise in the headline PMI would appear positive.

However scratch beneath the surface and the rebound in PMI from April’s 17 month low is far from convincing.

Raw material prices rose more sharply in May, but manufacturers were less able to pass on these increases and also faces supply issues. Dobson said:

These price and supply headwinds, combined with a further slowdown in new order growth, could jeopardise any further expansion of the manufacturing sector.

Updated

The International Monetary Fund has called for countries to work together on trade. In response to the US tariff moves, IMF spokesman Gerry Rice said:

Everybody loses in a protracted trade war, we encourage countries to work constructively together to reduce trade barriers and to resolve trade disagreements without resort to exceptional measures.

It is unfortunate that trade tensions are rising at a moment where the global recovery is being supported by trade. For the first time in a long time, trade is growing faster than global GDP, and spreading recovery around the world. Because of trade and innovation, billions of people today enjoy longer, healthier, and more prosperous lives.

Earlier IMF managing director Christine Lagarde, tweeted from the G7 Symposium in Canada:

Markets seem to be unmoved, not only by the US tariffs, but also the political uncertainty in Spain. UBS analyst Bosco Ojeda explains:

In a quick succession of events the Spanish parliament will vote this Friday June 1st a vote of no confidence which could remove from power president Mr. Rajoy (Partido Popular) and appoint Mr. Sanchez (PSOE)...

Mr. Sanchez (PSOE) has indicated that he aims to call for early elections but the exact timing is uncertain. Current polls show weak support for PSOE, while there is increasing support for [rival] Ciudadanos. So incentives to call elections are unclear and may extend towards the 2020 limit. Mr. Sanchez has reiterated a commitment with European orthodoxy and budget control in Spain. His plan includes the acceptance on the current 2018 budget. Going forward it may be more expansive on spending but there is not much room. Attempts to reverse reforms may not find a majority in parliament.A complete u-turn in policy seems unlikely.

Assuming, for the time being, a high degree of policy continuity, we do not anticipate a substantial impact on the pace of growth. Usually elections have a mild impact on GDP with delays in confidence and investments. Spain’s GDP growth at 3% YTD is solid but may slow moderately over the coming quarters, with full year growth of 2.8% in 2018 and 2.3% in 2019. According to polls the 3 largest parties (PP, Ciudadanos and PSOE) have c70% of vote intentions and support pro-European orthodox policies which in our view are unlikely to drive a u-turn in economic policy. Far left party Podemos according to polls does not have enough support to lead the economic policies. Overall, Spanish equities and bonds have lately suffered and discount a high level of uncertainty. Only contagion from Italy would represent a real risk to risk premium levels, in our view. Latest correction on equities offer opportunities, particularly on banks and largecaps.

Mayoress of Barcelona, Ada Colau, on the second day of the no-confidence motion debate against Spanish Prime Minister Mariano Rajoy at the Lower House in the Spanish Parliament in Madrid.
Mayoress of Barcelona, Ada Colau, on the second day of the no-confidence motion debate against Spanish Prime Minister Mariano Rajoy at the Lower House in the Spanish Parliament in Madrid. Photograph: EMILIO NARANJO POOL / POOL/EPA

Italy’s economy, the eurozone’s third biggest, grew by 0.3% in the first quarter of the year, in line with initial estimates.

The annual increase was 1.4%. Fourth quarter growth was revised up quarter on quarter to 0.4% from 0.3%.

Meanwhile the country’s manufacturing PMI came in below expectations:

The GDP figure and the PMI survey both came before the latest Italian political turmoil, of course.

Eurozone manufacturing falls to 15 month low

Eurozone factory growth was subdued in May, falling to a 15 month low, and the weakness looks set to continue.

The IHS Markit final manufacturing purchasing managers index came in at 55.5, in line with an initial estimate but below the April figure of 56.2. Chris Williamson, chief business economist at Markit, said:

Some of the weakness may have been related to a higher than usual number of holidays during the month, but risks appear tilted towards growth remaining subdued or even cooling further in the coming months.

There are signs the soft patch has further to run. Despite the production trend slowing markedly in recent months, the order book slowdown has been even sharper.

Although growth is slowing, it may still be strong enough for the European Central Bank to press on with its plans to reduce its economic stimulus programme, due to finish by the end of 2018.

Updated

Away from trade for a moment, and here is a handy round-up of predictions for the non-farm payroll numbers later:

We expect to hear more details of the EU’s response to the US tariffs at lunchtime (1pm BST) when the bloc’s trade commissioner gives a press conference.

With European markets moving higher, taking their cue from Italy not tariffs, Wall Street is also expected to open in positive territory, with IG indicated a 90 point or so rise on the Dow Jones Industrial Average. Connor Campbell, financial analyst at Spreadex, said:

Setting aside the trade war tensions between the US and EU, for now anyway, the European indices got off to a strong start on Friday as the Italian political crisis appeared to come to an end.

Though not exactly the ideal government in the eyes of the markets, with a combination of ministers from the anti-establishment Five State Movement and the right-wing League, the formation of any Italian government is something to celebrate given how pronounced fears were that the situation would result in a Eurosceptic snap election...

The euro wasn’t quite as enthused, its joy tempered by the brewing transatlantic trade issues, the nature of the Italian government and the fact today could see Spanish PM Mariano Rajoy receive a vote of no confidence. This meant the single currency only managed a 0.1% rise against both the dollar and the euro, crossing $1.17 against the former and £0.88 against the latter.

Legal proceedings against the US measures are due to be triggered at the World Trade Organisation today.

The EU wants the US actions declared illegal, but under WTO rules it will have to wait until mid-June to implement any balancing - i.e. retaliatory - measures. The US tariffs, of course, came into effect at midnight on Thursday.

A new reaction from China to the US tariffs, courtesy Reuters:

China’s foreign ministry said on Friday all countries should protect the normal trade order, when asked about United States’ decision to impose tariffs on steel and aluminum exports from the European Union, Canada and Mexico.

Ministry spokeswoman Hua Chunying made the comments at a regular briefing in Beijing.

On Tuesday the White House imposed 25% tariffs on $50bn of Chinese goods with “industrially significant technology.”

European markets open higher

The threat of a trade war does not seem to have spooked European investors too much, so far at least.

The FTSE 100 has climbed 0.6%, while Germany’s Dax is up a similar amount. News of the new government in Italy has helped the FTSE MIB gain 2.14% while Spain’s Ibex has added 1% despite the prospect of prime minister Rajoy being ousted.

The EU, Canada and Mexico have said they will take the trade dispute to the World Trade Organisation.

Europe has a list of products which will be subject to retaliatory measures, including peanut butter, Levi’s jeans, Harley-Davidson motor bikes and bourbon whiskey.

Canada plans tariffs on £9.6bn worth of goods, from steel to orange juice. Mexico plans to target a range of products including lamps, sausages, cranberries and cheese.

Former White House Press Secretary Anthony Scaramucci said there was still room for negotiation. He said President Trump’s action was a measure to correct the uneven and unbalanced trade system. He told Radio 4:

If you need to put up protective tariffs to protect your farming industry or parts of your industrial base, the United States is just basically saying ‘okay that’s not fair to us because we’re accepting your goods and services into our country’.

You’ve got to give us an opportunity to compete in your country.

I am sure that there are chips on both sides that can get traded to make the problem go away.

There’s always room in a negotiation with him, but he’s also the type of person that will walk from a negotiation.

Scaramucci
Scaramucci Photograph: Ariel Schalit/AP

Back with the US move on steel and aluminium, and Gareth Stace, from trade body UK Steel, told BBC Radio Five Live that the US tariffs were “illegal and protectionist.” He added:

This unilateral decision beggars belief. It is the last thing we need given that we are coming out of the worst steel crisis in a generation.

He said the claims that the tariffs were being imposed for national security reasons was a smokescreen, given only 3% of steel in the US is used for defence products. And he warned that UK manufacturers exporting to the US not only faced a direct hit, but also there would be a glut of steel which would otherwise have gone to the US flooding the European market. He said:

Twenty to twenty five million tonnes could flood our market.

Updated

Troubled Deutsche Bank's credit rating cut

Deutsche Bank, which on Thursday reportedly saw its US business put on a Federal list of problem banks, has now had its credit rating cut by S&P. The agency said:

S&P Global Ratings today lowered its long-term issuer credit ratings on Deutsche Bank AG and its core subsidiaries to ‘BBB+’ from ‘A-’. The outlook is stable. We removed the ratings from CreditWatch negative. ..

The lowering of our long-term issuer credit rating reflects that Deutsche Bank’s updated strategy envisages a deeper restructuring of the business model than we previously expected, with associated non-negligible execution risks.

While we consider management is taking tough, although likely inevitable, actions and proposes a logical strategy to successfully restore the bank to more solid, sustainable profitability over the medium to long term, the bank appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring.

Over the coming 18 months, we will look in particular for robust delivery against 2019 objectives, such as the €22 billion cost target, and evidence that the bank retains the solid support of its clients, something that would help underpin the revenue base in the CIB division amid a period of downsizing. While we regard capital markets earnings as inherently more volatile than retail and commercial banking, we consider a well-balanced blend of profitable businesses to be supportive of the bank’s creditworthiness. Therefore the bank’s ability to preserve its global capital markets franchise, focused in particular on Europe, underpins our stable outlook.

A Deutsche Bank building in Frankfurt.
A Deutsche Bank building in Frankfurt. Photograph: Michael Probst/AP

Agenda: Trade wars, Italy, Spain and US jobs all in focus

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Normally on a day like today, markets would be focused on the US jobs figures due later and the manufacturing surveys which will give the first snapshots of how the global economy performed last month.

But there are a few other distractions for investors to worry about, notably the prospect of a global trade war now that the US has confirmed it will slap steel and aluminium tariffs on the EU, Canada and Mexico. Traders are now waiting to see how the move, and the threatened retaliation will play out.

Here is our latest story on the US action:

Wall Street fell by 1% and European markets ended lower but the general reaction was more restrained than might have been expected (Germany’s Dax was one of the biggest losers but that has as much to do with fears about Deutsche Bank’s financial health as anything else.}

Asian market seem to have taken the news in their stride, given that the move was widely expected. The Nikkei 225 is down just 0.14% and the indications are that European markets will open mostly higher:

Jasper Lawler, head of research at London Capital Group, said:

The expected tit for tat response from the EU, Mexico and Canada is setting the scene for a trade war, which is not conducive to global growth. However, the losses have not been as large as we would have expected just a few months ago. The market is becoming more familiar with this administrations’ negotiating tactics and as a result, rather than seeing a move straight into risk off trading, we are seeing some investors take a wait and see approach. The traditional safe haven Japanese yen moved lower versus the dollar, as did gold and European bourses are pointing to a stronger start on the open.

There are other things on the agenda too.

Markets slumped earlier in the week on fears of a new Italian election, but those fears have now been eased with the formation of a populist government and that appears to be helping investor sentiment.

Indeed, as far as Europe goes, Spain has taken over the mantle of immediate problem child. Prime minister Mariano Rajoy is facing a vote of no confidence and according to the latest reports, he may well lose.

As far as the manufacturing surveys are concerned, there could be some signs of a slight rebound from April. Michael Hewson at CMC Markets said:

After a strong year of economic activity in 2017 the manufacturing sector got off to a slightly softer start at the beginning of this year, across the board. In some of the recent April data there is evidence that this softness has evened out a little and started to stabilise. In Europe activity was able to rebound a little in part, while in the US we also saw increasing evidence of rising prices with prices paid at 7-year highs. If this trend continues in today’s numbers then that should be supportive of a rebound in Q2. Expectations for Spain, Italy, France and Germany manufacturing are for 54, 53, 55.1 and 56.8.

In the UK we also saw a decent rebound after a soft March number, which may well have been weather related. Activity in May is expected to have steadied at around 53.5, a slight decline from the modest rebound seen in the April numbers with particular attention likely to be on cost price inflation which still looks fairly robust.

Finally the non-farm payrolls, where around 190,000 jobs are expected to have been created in May after a weak 164,000 figure in April. Wages are forecast to grow by around 2.8%, up from 2.6%.

Even if the numbers are disappointing, analysts believe this will not stop the Federal Reserve raising US interest rates in June.

Agenda:

9.00 BST Eurozone Markit manufacturing PMI

9.00 BST Italian GDP

9.30 BST UK Markit manufacturing PMI

13.30 BST US non-farm payrolls

14.45 BST US Markit manufacting PMI

Updated

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