GLOBAL ECONOMY-European factory growth slows; China cools

* Factory growth slows in euro zone

* China, South Korea PMIs point to moderating growth

* India’s PMI expands at fastest rate in 27 months

* U.S. seen expanding for 10th month but at slower pace

By Jonathan Cable and Alan Wheatley

LONDON/BEIJING, June 1 (BestGrowthStock) – Manufacturing growth
slowed across the globe in May as the pace of new orders eased
amid growing uncertainty over what damage Europe’s debt crisis
might do to the fragile economic recovery.

China’s official purchasing managers’ index released on
Tuesday fell in May to 53.9 from 55.7 in April, just below
market expectations but still the 15th straight month above the
threshold at 50 that separates expansion from contraction.

A companion index compiled by British research firm Markit
for HSBC dropped to an 11-month low of 52.7 in May from a
downwardly revised 55.2 in April. [ID:nTOE65001Z]

“Details suggest that overheating risks in China’s economy (Read more about the fastest growing economy.)
have receded under external weaknesses and domestic tightening,”
Citigroup economists noted.

In the euro zone, manufacturing activity expanded in May at
a considerably more sluggish pace than April’s 46-month high.

The UK managed to buck the trend, with the index holding at
April’s 15-year high, but economists expect that while May will
mark the tenth month of expansion for manufacturers in the
United States, it will be at slower rate than April.

The Markit Eurozone Manufacturing Purchasing Managers’ Index
for May sank to 55.8 from 57.6 in April, nudged down from an
earlier flash estimate of 55.9, but in the UK the index remained
at April’s 58.0. [EUR/PMIM] [GB/PMIM]

For a graphic see:

http://r.reuters.com/quj57k

The 16-nation bloc and its common currency have been hit by
waves of insecurity churned up by the region’s debt crisis and
fears that troubles in Greece may spread to other peripheral
economies.

“There has been a slowdown in growth globally and in the
euro zone there is subdued domestic demand due to the austerity
measures implemented in some countries,” said Luigi Speranza at
BNP Paribas.

Separate data earlier from the euro zone showed
unemployment, a lagging indicator, inched up in April to a near
12-year high of 10.1 percent. [ID:nBRQ009874]

The May global PMI surveys are being closely watched by
investors because they could shed light on how the government
debt crisis in the euro zone is impacting the world economy.

A Reuters poll on Friday showed surging emerging economies
will push global growth to a faster rate this year than
previously thought, but the upward momentum will run out next
year. [ID:nLDE64R1ST]

Canada is expected to be the first Group of Seven country to
hike interest rates later on Tuesday as its economy roars ahead.
[ID:nN25118365]

CHINA COOLS

The slower growth suggested by the different purchasing
manager data weighed on shares.

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top
shares was down around two percent, the MSCI index of Asia
Pacific stocks outside Japan (.MIAPJ0000PUS: ) fell over 2
percent. Shanghai stocks (.SSEC: ) ended the morning with a fall
of around 1 percent.

Since China has been such an engine of global growth as the
world emerged from its deepest recession in decades, a sharp
slowdown in China could deal a blow.

“The result indicates weakening of momentum in the
manufacturing sector and confirms our expectation that GDP
growth will slow sharply in Q2 and continue decelerating in Q3,”
Dariusz Kowalczyk, SJS Markets chief investment strategist in
Hong Kong said.

South Korea’s May PMI hit a five-month low of 54.61 compared
to 57.06 in April. The PMI coincided with official data showing
that the country’s exports in May jumped close to 42 percent
over a year earlier and the average exports per working day hit
a record $1.84 billion. [ID:nSUL000063] [ID:nTOE64U00S]

INDIA IGNITES

India’s PMI, based on a survey of 500 firms, surged to a
27-month high of 59.0 from 57.2 in April. It is also the 14th
month that the indicator has been above 50.

GDP figures on Monday showed that the economy expanded 8.6
percent in the March quarter, compared with a year earlier, the
strongest pace in six months.

“The Indian economy is hardly pausing for breath,” said HSBC
economist Frederic Neumann. [ID:nBMA007677]

Japan’s manufacturing sector grew in May at its fastest pace
in almost four years after a slowdown in April. The Nomura/JMMA
Japan Manufacturing Purchasing Managers Index rose to a
seasonally adjusted 54.7 from 53.8 the previous month.
[ID:nTKC005843]

Nomura economist Minoru Nogimori said high export orders
suggested Japan’s shipments will stay strong, particularly to
Asia.

“Although there are concerns over financial market
disruption triggered by government debt problems in Europe, we
expect the export-led manufacturing recovery to continue.”

Many Asian countries are still showing double-digit gains in
exports over year earlier months despit the week’s of financial
market turmoil triggered by the debt crisis.

“But the key word here is ‘yet’ and there still must be some
caution about the near-term strength of external demand,” said
Brian Jackson, senior emerging market strategist at Royal Bank
of Canada in Hong Kong.

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Insider TV: HSBC Chief China economist on the economy

http://link.reuters.com/huz37k

Graphic on Asia PMIs:
http://graphics.thomsonreuters.com/10/AS_PMI0610.gif

Graphic on China’s PMIs:

http://graphics.thomsonreuters.com/10/CN_PMI0610.gif
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Investing Advice

(Writing by Jan Dahinten; Editing by Jason Webb)

GLOBAL ECONOMY-European factory growth slows; China cools