CFD Markets News and Forecasts — 03-06-2021

The U.S. Energy Information Administration (EIA) revealed on Thursday that crude inventories plunged by 5.080 million barrels in the week ended May 28, following a drop of 1.662 million barrels in the previous week. Economists had forecast a draw of 2.443 million barrels.

At the same time, gasoline stocks rose by 1.500 million barrels, while analysts had expected a decline of 1.479 million barrels. Distillate stocks surged by 3.720 million barrels, while analysts had forecast a decrease of 1.479 million barrels.

Meanwhile, oil production in the U.S. decreased by 200,000 barrels a day to 10.800 million barrels a day.

U.S. crude oil imports averaged 5.6 million barrels per day last week, decreased by 0.6 million barrels per day from the previous week.

Dmitry Dolgin, ING's Chief Economist covering Russia and CIS countries, notes that Russia will prop up FX purchases by $1.3bn to $3.0bn in June, slightly higher than expected, reflecting strong oil prices and volumes in May. This puts more focus on the current account, with strong exports and low outward tourism fighting against dividends and higher imports.

"The Russian Finance Ministry announced an increase in monthly FX purchases from US$1.7bn in May to US$3.0bn in June. Our expectations, which were in the middle of consensus, suggested a more moderate increase to US$2.6bn."

"In our view, the higher-than-expected increase in the FX purchases suggests that in addition to the US$5/bbl increase in the average monthly Urals price in May, the Russian trade balance and budget may have also benefited from increased volumes of oil production and exports. Given the stronger-than-expected oil price environment and signs of faster economic recovery, our budget balance expectations for 2021 (deficit of 1.2% of GDP) now has room for improvement."

"The implications for the exchange rate, however, are not as straightforward, as the ruble is currently at the cross-roads of counterbalancing factors."

"A strong oil price environment, easing in the foreign policy tensions, continued foreign travel restrictions and benign global EM-risk mood create favourable conditions for the ruble in the near-term, regardless of the higher-than-expected FX purchases in June. Meanwhile, the dividend season, galloping imports and persistently high private capital outflow could serve as obstacles to ruble appreciation this summer. We continue to see USDRUB 72-73 levels as attractive for building up FX positions."

"The May balance of payments, to be released on 9 June, will be the next important data point to test this view. We expect a narrowing of the current account surplus amid persistent private capital outflow."

The Institute for Supply Management (ISM) reported on Thursday that its non-manufacturing index (NMI) came in at 64.0 in May, which was 1.3 percentage points higher than the unrevised April reading of 62.7 percent. This was the highest reading on the record and pointed to the growth in the services sector for the 12th straight month.

Economists forecast the index to increase to 63.0 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

All 18 services industries reported gains last month, as businesses reopened and production capacity increased, the ISM said, even though some capacity constraints, material shortages, weather-related delays, and challenges in logistics and employment resources continued.

According to the report, the ISM’s non-manufacturing Production measure climbed 3.5 percentage points to 66.2 percent from the April reading, while its New Orders gauge rose 0.7 percentage point to 63.9 percent, the Supplier Deliveries index jumped 4.3 percentage points to 70.4 percent and the Inventories indicator increased 2.4 percentage points to 51.5 percent. Meanwhile, the Employment indicator fell 3.5 percentage points to 55.3 percent. Elsewhere, the Prices index went up 3.8 percentage points to 80.6 percent, indicating that prices increased in May, and at a faster rate. This was the index's highest reading since July 2008.

Commenting on the data, the Chair of the ISM Services Business Survey Committee, Anthony Nieves, noted, “The past relationship between the Services PMI and the overall economy indicates that the Services PM for May (64 percent) corresponds to a 5.2-percent increase in real gross domestic product (GDP) on an annualized basis.”

The latest report by IHS Markit revealed on Thursday the seasonally adjusted final IHS Markit U.S. Services Business Activity Index (PMI) stood at 70.4 in May, up from 64.7 in April and higher than the earlier released “flash” estimate of 70.1. The latest reading pointed to the fastest growth in business activity across the U.S. service sector since data collection began in October 2009.

Economists had forecast the index to stay unrevised at 70.1.

According to the report, May’s unprecedented increase in output was supported by a marked rise in new business, in turn buoyed by the quickest growth in new export orders for nine months. Greater business requirements resulted in a further climb in employment, but the pace of job creation softened as firms reported difficulties filling vacancies. On the price front, input cost inflation accelerated to a series high amid ongoing supplier price hikes.

U.S. stock-index futures fell on Thursday, as investors assessed the latest U.S. job market data, which showed a pick up in jobs growth, looking for clues on the strength of the economic recovery and inflation.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

The revised data from the U.S. Labour Department showed on Thursday that nonfarm business sector labor productivity in the United States surged 5.4 percent q-o-q in the first quarter of 2021, as output jumped 8.6 percent q-o-q and hours worked rose 3.0 percent q-o-q (seasonally adjusted). That was in line with the initial estimate of a gain of 5.4 percent q-o-q but slightly worse than economists’ forecast for an advance of 5.5 percent q-o-q. In the previous quarter, labor productivity fell 3.8 percent q-o-q .

In y-o-y terms, the labor productivity increased 4.1 percent, reflecting a 1.1-percent gain in output and a 2.9-percent drop in hours worked.

Meanwhile, unit labor costs in the nonfarm business sector in the first quarter climbed 1.7 percent q-o-q compared to an initial estimate of a 0.3 percent q-o-q decrease and a revised 14.0 percent q-o-q surge in the prior quarter (originally a 5.6 percent q-o-q increase). Economists had forecast a 0.4 percent q-o-q drop in first-quarter unit labor costs.

Unit labor costs quarterly gain reflected a 7.2-percent q-o-q jump in hourly compensation and a 5.4-percent q-o-q advance in productivity.

Compared to the corresponding period of 2020, unit labor costs rose 4.1 percent, as hourly compensation increased 8.3 percent and productivity rose 4.1 percent.

The data from the Labor Department revealed on Thursday the number of applications for unemployment decreased more than anticipated last week, hitting a fresh pandemic-era low.

According to the report, the initial claims for unemployment benefits dropped by 20,000 to 385,000 for the week ended May 29. This was the lowest reading since March 2020, when the COVID-19 pandemic struck.

Economists had expected 390,000 new claims last week.

Claims for the prior week were revised downwardly to 405,000 from the initial estimate of 406,000.

Meanwhile, the four-week moving average of jobless claims dropped to 428,000 from a downwardly revised 458,500 in the previous week.

Continuing claims increased to 3,771,000 from a downwardly revised 3,602,000 in the previous week.

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Thursday the U.S. private employers added 978,000 jobs in May. This marked the largest advance in private-sector employment since June 2020.

Economists had expected an increase of 650,000.

The April number saw a downward revision to 654,000 from the originally reported 742,000.

“Private payrolls showed a marked improvement from recent months and the strongest gain since the early days of the recovery,” noted Nela Richardson, chief economist, ADP. “While goods producers grew at a steady pace, it is service providers that accounted for the lion’s share of the gains, far outpacing the monthly average in the last six months. Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the panemic and economy.” 

GBP strengthened against its major rivals in the European session on Thursday, bolstered by the UK’s May Services PMI data, which showed that Britain's services sector witnessed its fastest growth in activity in 24 years last month, as business and consumer spending surged in response to looser pandemic restrictions. 

The report from the IHS Markit/the Chartered Institute of Procurement & Supply (CIPS) showed that final services PMI rose to 62.9 in May, up from 61.0 in April and a preliminary estimate of 61.8.  The latest reading was the highest since May 1997. The report also revealed that new orders rose at the quickest rate since October 2013 and the pace of job creation was the fastest since March 2015, with survey respondents citing a combination of new hires and the return of employees from furlough. Backlogs of work nonetheless continued to accumulate at a robust pace due to forward bookings, pressure on business capacity and staff shortages. In addition, input cost inflation reached its highest since July 2008. Commenting on the May PMI data, Tim Moore, Economics Director at IHS Markit, noted: “The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns

Adding to the positive sentiment, the Office for National Statistics (ONS) reported that the proportion of British businesses that were open in the first half of May increased to 87% in the second half of May 2021 from 83% in the previous two-week period, as COVID restrictions continued to ease across the UK. That was the highest proportion since comparable estimates began in June 2020. Meanwhile, the proportion of employees on furlough fell to 8% (equates to 2.1 million workers), the lowest since October 2020.

FXStreet reports that EUR/USD rally continues to lose momentum and with the intraday base negated, economists at Credit Suisse look for a retest of key support at 1.2134/25 – removal of which would see a near-term top established.

“With daily RSI momentum and daily MACD momentum now moving lower, the rally from late March continues to show signs of tiring and the immediate risk stays seen on balance lower.”

“Immediate support moves to 1.2163/59, below which can see a retest of the recent low and 23.6% retracement of the March/May uptrend at 1.2134/25. A break here can see a top complete to reinforce a broader sideways range and a fall to 1.2053/51 – the mid-May low and 38.2% retracement. Our bias remains to look for a better floor here.” 

“Resistance moves to 1.2218 initially, then 1.2234 and more importantly at the 1.2255/67 current cycle highs.”

FXStreet reports that Lee Sue Ann, Economist at UOB Group, suggests the Australian economy could expand by around 4.8% this year.

“The Australia economy rose 1.8% q/q in the first quarter, higher than expectations for a 1.5% q/q reading, but a slower pace of growth than the previous quarter (when it rose a revised 3.2% q/q). Nonetheless, this would see the Australian economy recovering to above pre-pandemic levels.”

“The economic rebound has been underpinned by Australia’s ability to contain the COVID-19 situation, boosting consumer and business confidence. But a potential risk to the outlook is the country’s sluggish rollout of vaccine, which saw the second-most populous state of Victoria plunged into a lockdown on 27 May after the state reported its first locally transmitted COVID-19 cases in nearly three months early last week, forcing its near seven million residents to remain home except for essential business.”

“Looking ahead, we continue to see the Australian economy transitioning beyond the rebound phase to a more normal rate of growth, mindful that economic support is still coming from both fiscal and monetary policy. We have revised up our 2021 full-year GDP forecast to 4.8% on the back of these figures, but our forecast of 3.2% for 2022 remains unchanged.”

FXStreet notes that AUD/USD remains trapped in a range after a volatile intraday reversal on Wednesday. However, a move below the key price lows at 0.7688/75 would still confirm an in-range top to turn the risks lower, the Credit Suisse analyst team reports.

“A break below the 0.7676/75 range lows is still needed to complete a ‘descending triangle’ top and turn the risks lower within the broader range. Next supports thereafter are seen at 0.7588/86, with the size of the potential top suggesting a move to the year to date lows at 0.7532/31 and the 200-day average, which we would expect to prove a tough barrier.” 

“Near-term resistance stays at 0.7774, above which on a closing basis would lessen the topping risk. Resistance thereafter stays at 0.7814/18, above which should reassert an upside bias and resolve the tight range higher, with the next level then seen at 0.7892/7905.”

FXStreet reports that economist at UOB Group Lee Sue Ann reviews the recently published flash inflation figures in the euro bloc.

“According to flash estimates, headline inflation in the Eurozone rose to 2.0% y/y in May from 1.6% y/y in April, slightly above expectations for 1.9% y/y… Core inflation rose to 0.9% y/y for the month, from 0.7% y/y in April, recovering the losses from the March reading.”

“This is the first time since late-2018 that annual inflation in the region is above the European Central Bank (ECB)’s target of close to but below 2%. The ECB has nonetheless stressed that a rise in inflation was likely triggered by one-off factors and that the long-term outlook remains benign. Still, the central bank’s dovish tone could be challenged if inflation continues to push higher in the months ahead.”

“The discussion about whether higher inflation is indeed temporary or structural will be a very prominent debate for the months to come. Admittedly, we will probably know by the end of the year whether these drivers remain one-offs or have led to a more permanent increase in inflationary pressures.”

FXStreet reports that analysts at Credit Suisse note that GBP/USD maintains a bearish “reversal day”, raising the prospect of further weakness in the sideways range of the past three months with a break below 1.4091 needed to mark a near-term top.

“Support moves to 1.4112 initially, then more importantly at the 1.4091 recent low. Beneath here would see a small top complete to clear the way for a deeper setback to the March/May base at 1.4017/06. We would now see scope for a move below here to the uptrend from March 2020 at 1.3982/77, potentially even the 55-day average at 1.3942, but with this level expected to prove a better floor.” 

“Resistance stays seen at 1.4184/92 initially, above which can clear the way for a move back to 1.4213, then a retest of 1.4238/49."

CNBC reports that Edward Yau, Hong Kong’s secretary for commerce and economic development, said that Hong Kong’s economy has rebounded sharply after being hit by the Covid-19 pandemic — but it’s not out of the woods yet and some sectors are still reeling.

“The distribution of this rebound is rather uneven,” Edward Yau told.

Yau explained that imports and exports have been a “very strong catalyst” of growth in the last few months, with overall trade hitting record levels in some months. However, retail sales are moderating and tourism is still struggling to recover, he said.

Such uneven economic performance is also reflected in the jobs market, and will likely remain so as Hong Kong faces the “twin battle” of containing the spread of Covid and reviving the economy, added Yau.

The Hong Kong economy grew 7.9% in the first quarter of 2021 compared to a year ago. It was the city’s first economic expansion after six consecutive quarters of year-on-year contraction.

FXStreet reports that according to economists at Westpac, DXY upside is likely to prove fleeting.

“The Fed’s guidance remains a major constraint that should leave the USD languishing, even if the data cycle turns for the better. Admittedly more Fed officials are warming to a tapering discussion, but Powell, Clarida and Brainard remain committed to patience and any decision is months away. Even then, sustained DXY upside may not develop until tapering is very well advanced.”

“The Fed’s patient approach is likely to become an even more obvious drag on the USD in coming months. DXY is still a sell on strength, looking for fresh 2021 lows on a 3-month horizon.”

Reuters reports that China's commerce ministry said that normal discussions between China and the United States on the trade and economic fronts have resumed and both sides will start to pragmatically solve some concrete issues for producers and consumers.

China's Vice Premier Liu He, who has led trade negotiations with the United States, has held two video calls with U.S. Trade Representative Katherine Tai and Treasury Secretary Janet Yellen in less than a week, marking the first formal engagement between the two sides on trade and economic issues under the new Biden administration.

Both calls lasted about 50 minutes, commerce ministry spokesman Gao Feng told a regular news conference, adding that conversations started smoothly and Sino-U.S. trade, macro-economic situations and domestic policies were among the topics.

China also raised its specific concerns based on the performance of its domestic economy, he said.

FXStreet reports that according to economists at MUFG Bank, an increase of around 1 million on Nonfarm Payrolls should lift yields and USD.

“There is likely less appetite for putting on fresh risk ahead of the key event of the week – Nonfarm payrolls data from the US on Friday. That will start to come into greater focus today with the release of the ADP employment data – the market consensus is for a gain of 650K in May after a 742K gain in April. If the consensus print was confirmed tomorrow and on Friday it would imply the marked weaker than expected April NFP print would not be captured by ADP and a divergence would exist. A consensus print in ADP may see the NFP consensus of 650K creep a little higher ahead of the release on Friday.”

“We suspect something closer to a 1 M increase in NFP would be needed to notably lift yields and the dollar.”

According to the report from IHS Markit/CIPS, the recovery in UK service sector output gained further momentum in May, driven by resurgent business and consumer spending in response to looser pandemic restrictions. This led to the strongest rate of employment growth for just over six years. Backlogs of work nonetheless continued to accumulate at a robust pace due to forward bookings, pressure on business capacity and staff shortages. Meanwhile, input cost inflation reached its highest since July 2008. A combination of strong demand and rising operating expenses resulted in the steepest increase in prices charged by service providers since the survey began in 1996.

At 62.9 in May, up from 61.0 in April, the headline seasonally

adjusted UK Services PMI Business Activity Index was above the 50.0 no-change value for the third month in a row. The latest reading pointed to the fastest rate of output growth for 24 years.

Service providers indicated a sharp and accelerated rise in new order volumes during May, with the speed of recovery the fastest since October 2013. This reflected a swift turnaround in domestic demand due to the reopening of the UK economy. Export sales fell slightly in comparison to April, which was attributed to tight restrictions on international travel and the impact of post-Brexit constraints on trade with EU clients.

May data pointed to a marked increase in unfinished work across the service economy. The latest accumulation of backlogs was the sharpest since July 2014. Survey respondents mostly cited better than-expected client demand. There were also reports that staff shortages and, in some cases, a reluctance of employees to return from furlough had contributed to rising volumes of work-in-hand.

Strong inflationary pressures did little to dampen business expectations for the year ahead, with confidence drifting down only slightly since April. The index remained close to March's 14-year high and signalled a strong degree of optimism about near-term business activity growth.

According to the report from IHS Markit, a resurgent services economy helped to drive private sector growth higher during May. After accounting for seasonal factors, the Eurozone PMI Composite Output Index recorded 57.1, up from 53.8 in April. Not only did May mark a third successive month of expansion, but the best recorded since February 2018.

The upturn in the index was driven in the main by a noticeable acceleration of growth in services activity. May’s data indicated a second successive monthly rise in service sector output, and the best recorded for nearly three years. Nonetheless, despite seeing the slowest growth for three months, manufacturing output continued to a rise at a sharper rate than services activity.

Thanks to continued strength in demand for manufactured goods and a noticeable improvement in services new business, private sector new work rose to the strongest degree since June 2006.

Sales growth was also broad-based by demand source, with gains recorded in both domestic and international markets. New export business rose for a sixth successive month, with the net increase the sharpest since composite data were first available in September 2014.

Confidence in the outlook also improved during May, hitting its highest level since comparable data were first available in mid-2012. That was despite signs of continued cost pressures. Input prices overall increased to the sharpest degree in over a decade. Efforts to pass on higher input costs to clients in the form of increased output prices meant that output prices rose at the strongest rate in the series history. 

According to the report from IHS Markit, Spain’s service sector extended its recent recovery into May, expanding at its strongest rate since August 2015 as a lifting of COVID-19 restrictions led to a more widespread reopening of business units and a noticeable uplift in demand.

The headline Business Activity Index rose to 59.4 from 54.6 in April. That signalled a back-to-back increase in activity levels and the single strongest monthly growth recorded by the survey since August 2015.

Underpinning the rise in activity was a strong rise in new business volumes (the best since the start of 2018). Panellists widely reported that the lifting of COVID-19 restrictions had led to not only further business unit re-openings, but also a noticeable rise in demand and sales, especially from domestic sources. Although there were some signs of strengthening foreign demand and a first rise in overall new export business for the first time in over two years, the rate of growth was modest and much lower than for total new work. With sales rising noticeably, capacity was tested somewhat. Backlogs of work outstanding rose for the second month in succession, and at the sharpest pace since July 2015. In response, companies added to their payroll numbers, and May data indicated a second successive monthly increase in overall service sector employment. The rate of growth was also the sharpest recorded by the survey for over two years.

Confidence in the outlook also encouraged companies to take on additional staff. Once again over 60% of surveyed firms anticipate a rise in activity from present levels in 12 months’ time, and overall confidence was only slightly lower than in April when sentiment was at its most positive in over 17 years. Expectations continue to be supported by positive projections for sales and demand as COVID-19 restrictions are lifted in line with hoped for success with vaccination programmes.

FXStreet reports that economists at ANZ Bank expect core US CPI to remain above 3%for the moment. This is likely to push up inflation expectations and allow gold prices to rally.

“With the US economy firing on all cylinders and ongoing supply bottlenecks, substantial fiscal stimulus and a rapid vaccine rollout, we expect core US CPI to remain above 3% for the rest of the year.”

“Our central case for the USD is that there is further weakness ahead. We are relatively convinced that growth will continue to improve and ultimately broaden out beyond the US. This will be enough to generate modest weakness in the USD.”

“Using our forecasts for inflation, bond yields and the USD, our gold valuation model suggests prices could push back above $2,000/oz in H2 2021. Nevertheless, gains beyond that will be increasingly hard to achieve as the world economy recovers from the pandemic. Should inflation prove persistent and inconsistent with the Fed’s 2% mandate, members say the Fed won’t hesitate to act. Any subsequent rise in interest rates or reduced bond purchases would likely weigh on investor demand.”

During today's Asian trading, the US dollar rose against the euro, the yen, the australian dollar and the pound.

U.S. economic activity grew at a moderate pace from early April to late May, slightly faster than earlier this year, the Fed's Beige Book reported on Wednesday. Respondents in several of the country's twelve regions noted the positive impact on the economy of COVID-19 vaccination and the easing of social distancing measures, while noting the negative effects of supply chain disruptions.

The president of the Federal Reserve Bank of Philadelphia, Patrick Harker, said yesterday that it was time to think about the timing of the winding down of the Fed's asset purchase program. "I think we should slowly, carefully reduce the volume of repurchases at the appropriate time," Harker said.

Investors are waiting for the statistical data on the US labor market, which will be released on Friday. They will allow you to get an idea of the process of labor market recovery and possible further steps of the Federal Reserve. Economists predict that the number of jobs in the US economy increased by 674 thousand in May, compared with 266 thousand in April.

The ICE index, which tracks the dollar's performance against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose 0.18%.

FXStreet reports that economists at ANZ Bank discuss NZD/USD prospects.

“There was no US data but the Fed’s Beige Book was released, the general tone of which was moderate, giving the USD few pointers. Commodity prices were stable, offering no real direction – but this is of course one of key pillars of support for the NZD. With markets eagerly awaiting US Nonfarm Payrolls data on Friday (and CPI next week), more range-trading beckons until a new catalyst comes along.”

CNBC reports that wide restrictions that China slapped on Australian exports are not as damaging as it was feared they’d be, because Australia is finding new markets for its goods.

Tensions between the countries have soared in recent months, deteriorating sharply after Australia supported a call for a global inquiry into China’s early handling of Covid-19. Beijing has since taken several measures restricting Australian imports, ranging from levying tariffs to imposing other bans and restrictions. That has affected Australian goods including barley, wine, beef, cotton and coal. 

Australia is one of the few developed countries in the world that has enjoyed a trade surplus with China. With China being Australia’s largest trading partner, analysts expected Australia to be hit badly by the restrictions. 

But those analysts now say Australia has managed to contain the damage by diverting many of its exports to other countries.

Overall, the affected Australian exports to China — except for coal — held steady through most of 2020 to the tune of just over $9 billion. They eventually dropped to about half that amount as restrictions escalated in late 2020.

Following the restrictions, those same goods found other export markets, and trade rose by about $4.2 billion in annualized terms for those goods, offsetting most of the losses from China.

EUR/USD

Resistance levels (open interest**, contracts)

$1.2304 (2709)

$1.2263 (1804)

$1.2235 (3158)

Price at time of writing this review: $1.2190

Support levels (open interest**, contracts):

$1.2143 (1180)

$1.2097 (1965)

$1.2049 (3535)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 4 is 72117 contracts (according to data from June, 2) with the maximum number of contracts with strike price $1,2100 (3590);

GBP/USD

$1.4220 (1328)

$1.4193 (906)

$1.4178 (1462)

Price at time of writing this review: $1.4153

Support levels (open interest**, contracts):

$1.4125 (194)

$1.4090 (838)

$1.4046 (641)

Comments:

- Overall open interest on the CALL options with the expiration date June, 4 is 20242 contracts, with the maximum number of contracts with strike price $1,5000 (2696);

- Overall open interest on the PUT options with the expiration date June, 4 is 34839 contracts, with the maximum number of contracts with strike price $1,3100 (3957);

- The ratio of PUT/CALL was 1.72 versus 1.71 from the previous trading day according to data from June, 2

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that survey results from IHS Markit showed that China's service sector growth moderated in May as activity and new order growth softened since April.

The Caixin services PMI dropped to 55.1 in May from a four-month high of 56.3 in April. Nonetheless, the score remained firmly above the neutral 50.0 level to suggest a marked growth in activity.

Business activity as well as new orders rose sharply in May, despite rates of expansion softening since April. Customer demand continued to expand due to the successful containment of COVID-19 in China, while there were also reports of new product offerings boosting sales.

Employment across China's service sector rose for the third consecutive month, with a number of firms adding to their payrolls due to rising sales.

The 12-month outlook for services activity remained strongly positive but the overall degree of positive sentiment dipped to a four-month low.

Further, the composite output index fell to 53.8 in May from 54.7 in April, to signal a softer expansion of overall Chinese business activity. Growth in both services and manufacturing sectors moderated in May.