Services PMI Wrap: Britain, Spain, Impress as Germany, Italy Lag

Services PMI's for major economies around the world were released overnight to mixed results. Strong numbers from the United Kingdom and Spain were offset by weaker data from Germany and Italy while China's figures raised further fears of a slowdown.

Chinese Data

The Chinese HSBC Services PMI rose to 51.2 in May from 51.1 in April. The slow pace of expansion, coupled with the recently worrisome manufacturing data, continued to raise fears that a Chinese slowdown could precipitate a global summer swoon in the economy. Notably, the services sector in China accounted for 46 percent of GDP, marking a significant uptick in the services economy in China and raising the importance of this data point in comparison to its manufacturing counterpart.

Earlier this week, China's official Services PMI declined to 54.3 in May from 54.5 in April. Meanwhile, the official Manufacturing PMI ticked up to 50.8 in May from 50.6 as the HSBC/Markit Manufacturing PMI dropped to 49.2, the lowest level since October 2012 and down from 50.4 in April.

Europe Fears

In Europe, Spain's Services PMI impressed markets this morning as the PMI rose to 47.3 in May from 44.4 in April. Economists surveyed by Reuters expected a reading of 45.0. The strong services PMI comes on the back of strong Manufacturing PMI on Monday and an employment report that doubled economist forecasts.

Britain's Services PMI was also a bright spot as the PMI rose to 54.9 from 52.9 in April on expectations of a reading of 53.0. England also reported better than expected manufacturing data earlier this week and the Construction PMI was better than expected as well.

Negatively, Germany reported a Services PMI that missed expectations, raising fears that the European economy will remain stuck in a rut. The German Services PMI declined to 49.7 in May from 49.8 in April on expectations of a flat reading. Italy's PMI was also weak, dropping to 46.5 in May from 47.0 in April on expectations of a rise to 47.5.

Broadly, the Eurozone's Services PMI was also weak in May as the PMI printed at 47.2 from 47.5 in April. Economists surveyed had forecast the report to come in flat at 47.5.

Market Impact

Chinese shares declined marginally overnight on the data as the news was taken as a mixed bag. The Shanghai Composite Index declined 0.03 percent while the CSI 30 Index, a measure of the 30 largest stocks in China, slipped 0.2 percent.

In Europe, shares dropped following the weak data from Germany and the Eurozone as a whole. The German DAX dropped 1.05 percent and the French CAC 40 Index declined 1.17 percent while the FTSE 100 Index fell 1.36 percent in London. The Spanish Ibex Index saw slower declines as the index fell 0.4 percent and the Italian MIB Index fell 0.22 percent.

U.S. Outlook

U.S. equity futures dropped to session lows in the wake of the data as markets indicated a second consecutive day of losses on Wall Street. S&P 500 futures fell 7.8 points to 1,623.40 while Dow futures fell 59.00 points to 15,120.00. NASDAQ 100 futures fell 11.5 points to 2,963.25.

Later this morning, the U.S. will get its own view of the domestic service sector as the ISM Non-Manufacturing Index is due out. Economists surveyed by Reuters expect the index to rise to 53.5 from April's 53.1. Recall Monday the index's manufacturing counterpart showed contraction in May.