Market News

• Services PMI 44.3 vs 42.9 prelim
• Prior 46.5
• Composite PMI 44.9 vs 43.5 prelim
• Prior 47.6

Even with an improvement to the initial estimates, this is still a very poor reading for French services activity. Of note, both activity and new business levels decreased at their steepest rates in five-and-a-half years with employment conditions also deteriorating at its quickest pace since early last year.

Adding more woes to the weakening business sentiment is that the French economy saw a further sharp uplift in inflationary pressures during May.

The rate of input price inflation accelerated for the third straight month in May, reaching its highest in just over three years. Meanwhile, French service providers raised their charges midway through the…

• Prior 46.9
• Final Composite PMI 48.8 vs 48.6 prelim
• Prior 48.4

Key findings:

• Service sector remains in contraction in May, but expectations rebound
• Business activity falls for second month running, albeit at a slower pace
• Expectations for activity in the next 12 months rebound from April's low
• Output price inflation eases despite persistent strong cost pressures

Comment:

Phil Smith, Economics Associate Director at S&P Global Market Intelligence:

"The service sector remained mired in contraction territory in May, thereby raising the prospect of the overall economy also slipping into contraction in the second quarter following a solid growth performance in the opening three months of the year.

"Demand for services continues to be stifled by a…

• Prior 49.8
• Composite PMI 50.4 vs 50.5 prior

Key findings:

• Italian service providers face strongest cost pressures since start of 2023
• Business activity falls for third month running
• New business back in contraction
• Rate of cost inflation hits 40-month high

Comment:

Eleanor Dennison, Economist at S&P Global Market Intelligence:

"The Italian private sector continued to rely on the manufacturing boost brought on by panic-driven stockpiling to avoid a contraction in May. Although there was little change at the top level, if we lift the lid, we can see that the services economy is struggling in the face external challenges, contributing to dampened demand, particularly from domestic customers.

"The fate of the services sector hangs on a multitude…

• Services PMI 50.1 vs 48.0 expected
• Prior 47.9

Overall business activity in the services sector recovered in May, supported by a marginal increase in new business. So, that's some good news as demand conditions hold up despite the continued uncertainty from the Middle East conflict.

That being said, the underlying performance continues to be rather poor with the second quarter poised to be one of the worst in over five years. So, there's that to consider when viewing the headline reading as a benchmark. Mind you, Spain has always been one of the brighter spots in the euro area economy despite the struggles seen in Germany, Italy, and now France over the years.

Besides that, cost pressures remained acute in May. Of note, input prices rose…

• Trump tries again. US proposes 10% tariffs on 60 nations, forced-labour Section 301 probe
• Australia Q1 GDP slows to 0.3% as data centre imports drag on growth
• China Services PMI, May 2026 54.4 (expect 52.3, prior 52.6) fastest expansion in 3 months
• Australia Q1 2026 GDP 0.3% q/q and 2.5% y/y.
• PBOC sets USD/ CNY mid-point today at 6.8184 (vs. estimate at 6.7673)
• SpaceX targets $75bn IPO at $135 a share as Nasdaq roadshow nears
• Japan services PMI flatlines in May as war costs hit record high
• Japan approves $19bn supplementary budget to offset Trump war Middle East inflation
• USD/JPY hits 160, Japan fin min jumps in with open mouth operations
• US and partners intercept Iranian missiles and drones across Gulf
• Chaos descending on Middle East - air attacks…

The US proposed tariffs of at least 10% on imports from around 60 countries under a Section 301 forced-labour probe, with higher 12.5% levies targeting China, India, Japan and others.

Summary: Source: Office of the US Trade Representative; reporting by financial newswires

• The USTR has recommended tariffs of at least 10% on imports from approximately 60 countries including Canada, Mexico, the EU, Taiwan and the UK, following a Section 301 investigation into forced-labour practices
• China, India, Japan, South Korea, Brazil and Switzerland face a higher proposed rate of 12.5%
• The levies are not immediate; written public comments are due by July 6 and Section 301 panel hearings begin July 7, with implementation to follow review
• The move is…

Australia's Q1 GDP rose 0.3% q/q and 2.5% y/y, both below forecasts, as a surge in data centre and fuel imports wiped 0.8 percentage points from growth despite strong domestic demand.

Summary: Australian Bureau of Statistics, Q1 2026 National Accounts

• GDP rose 0.3% q/q in Q1 2026, below the 0.5% consensus and down sharply from 0.9% in Q4 2025; annual growth held at 2.5% against a 2.7% forecast
• Net trade subtracted 0.8 percentage points from growth as imports surged, driven by data centre equipment and fuel; domestic demand contributed a full percentage point to growth
• Private business investment jumped 6.0% q/q, its highest share of real GDP at 12.6% since September 2015, with data centre-related machinery and equipment adding 0.7 percentage…

China's services PMI rose to 54.4 in May from 52.6, the fastest expansion in three months, with new orders growing for a 41st straight month and employment returning to growth.

Earlier PMI data for the month:

• Official PMIs for May were mixed, while the private manufacturing PMI fell to 51.8.

China's services acceleration stands in sharp contrast to the stagnation and contraction visible in Japan and Australia's May PMIs, and reinforces the view that Beijing's domestic demand support measures are providing meaningful insulation from the global energy shock. The composite reading at 54.0 is comfortably expansionary and the second-fastest in two years, which gives the PBOC room to hold rather than ease further. The one watch point is cost…

Data for Australian economic growth in the January - March quarter of 2026.

GDP 0.3% q/q

• expected 0.5%, prior 0.8%

GDP 2.5% y/y

• expected 2.7%, prior 2.6%

Rising rates and war impacts will bite harder in Q2.

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Capital Expenditure 3.0% q/q (huge, data centres linked)

• prior 0.7%

Final Consumption 0.3% q/q

• prior 0.5%

Japan's services PMI flatlined at 50.0 in May as business costs surged to a 43-month high on Middle East war disruption, ending 13 months of sector expansion.

Summary: Source: S&P Global Japan Services PMI, May 2026

• The headline Services Business Activity Index fell to 50.0 in May from 51.0 in April, ending a 13-month expansion streak; the composite Output Index slipped to 51.1 from 52.2, with growth driven solely by manufacturing
• Business input costs rose to the greatest extent in 43 months, driven by fuel, energy and raw materials price hikes linked to the Middle East war and supply chain disruption, alongside higher labour costs
• Output price inflation reached the second-fastest pace since the survey began in 2007, with the composite output…

Japan's cabinet approved a ¥3.1 trillion supplementary budget funded by deficit bonds to subsidise fuel and utility costs, with a ¥2.5 trillion reserve targeting gasoline prices first.

Summary:

• Japan's cabinet approved a ¥3.1 trillion ($19 billion) supplementary budget to cushion households and businesses from Middle East-driven inflationary pressure
• The package creates a ¥2.5 trillion contingency reserve to subsidise commodity price rises, with gasoline price controls the initial priority, followed by utility bill support
• The budget will be funded entirely through deficit-financing bonds; the government projects overall calendar-year bond supply will remain unchanged by cancelling some debt approved under the previous fiscal year budget and…

Building Permits m/m (Apr) -3.4%

• prior -10.5%

Building Permits y/y (Apr) +10.2%

• prior +9.0%

Private House Approvals m/m (Apr) -1.0%

• prior +0.9%

Business Inventories q/q (Q1) +0.5%

• prior -0.1%

Company Gross Profits q/q (Q1) -1.3%

• prior +5.8%

Net Exports Contribution to GDP (Q1) -0.8%

• prior -0.1%

Current Account (Q1) -A$27.1B

• prior -A$21.1B

Earlier:

• RBA's hawkish Harper hints herald hike
• Australia minimum wage rises 4.75%