U.S. ADP Severely Disappoints, Chinese Manufacturing Falls to 9 Month Low, European Manufacturing Slows Further

A quite disappointing string of economic news today, but then again we had a slew of bad reports yesterday and as long as bailouts, handouts, and QE's are in the offing the market seems to brush it off.  2011 is shaping up very similar to 2010 with a late spring/summer slowdown in economic data - and market peak in April.  Of course no flash crash in 2011, and unlike late spring/summer 2010 the Fed is already engaged in QE.  That said you can already hear the murmurs on Wall Street for QE3 ("get in my belly!") - even though one can argue QE2 has been a cause for much of the recent weakness by weakening the dollar & helping to stoke speculators to drive up commodities esp. oil.  Which in turn is causing consumers of the non affluent kind to pull back, and businesses to hire less than they otherwise would to protect profit margins.  But that's not the way The Bernank sees is.

First, ADP employment data which really surprised to the downside at only +38,000.  Not sure where all those McDonald's jobs went.  The perma bulls already are claiming this bad data is due mostly to the Japan situation and supply chain shocks.  Of course that ignores weekly jobless claims well above 400,000 for most of the past two months.

• Private-sector payroll growth slowed sharply in May, coming in far below expectations and falling to the lowest level in eight months.

On the positive side, this lowers expectations for Friday which should lead to to .... (wait for it).... a "better than expected!" report, increasing the chances for a gap up!  Expectations were for +185Kish job gains Friday so if Wall Street's economists can lower that by 50K or so in the next 48 hours, the birth death guestimate by government alone (and throw in some McJobs) should be able to cover the needed figure to create glee Friday.

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Turning overseas, the Chinese PMI figures came in at 9 month lows.  But still expansionary. In the past few months China slowing was seen as "good" due to an overheated economy running hot on inflation.  Now, it is causing some worry.  (please keep in mind there are 2 reports in China, one public - one private)

• China's manufacturing activity expanded in May at its weakest pace in three quarters, as the economy faced headwinds of high inflation and government efforts to rein in prices, according to rival surveys of companies released Wednesday.
• The official China Federation of Logistics & Purchasing Managers' Index eased to 52.0 from 52.9 in April, marking the slowest pace of growth in nine months.  The result was below the median forecast of 52.2 in a Reuters survey of economists.
• Meanwhile, a separate PMI published by HSBC and compiled by U.K. group Markit showed headline activity at 51.6, easing from 51.8 in April, the slowest pace of growth in 10 months. 

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Europe also came in weaker, but really the focus here is Germany.  This is the second month in a row of quite dramatic pullbacks in European PMI, although from very elevated levels.

• Growth in the eurozone's manufacturing sector slowed during May, a survey has indicated, as the bloc's weaker economies continued to struggle.  The Markit purchasing managers' index (PMI) for eurozone manufacturers fell to 54.6 from 58 in April. A reading above 50 indicates growth.
• The manufacturing sectors in Greece and Spain contracted, while Italy and the Irish Republic slowed sharply.
• France and Germany, key drivers of eurozone growth, also saw a slowdown. In Germany, the PMI reading fell to 57.7 from April's figure of 62, but the sector remained strong. "It's a significant slowdown but from an exceptionally high level, so some of the froth is coming off," said Markit economist Tim Moore.