The capital markets are off to a mixed start to start the last week of the month. Asian shares were mostly higher, though the Nikkei shed 0.5%. European shares are also higher, extending the three-week high seen last week. 

The US dollar is mixed. The yen is the strongest of the majors. The media continues to play up tension between the US and Japan at the weekend G7 meeting over the appropriateness of intervention, but Europe is not very sympathetic either. Today’s news makes it even more difficult. Japan reported its largest trade surplus in several years and nearly 30% higher than economists expected.  

Below the surface, the details were not particularly inspiring. Exports fell for a seventh consecutive month and the year-over-year pace of -10.1% was a little more than expected. Imports shocked with a 23.3% plunge. The market has expected a little more than a 19% decline. In March, they fell by almost 15%.   

Also, illustrating the difficult straits the economy is in, the preliminary manufacturing PMI fell to 47.6 from 48.2, its third month below the 50 boom-bust, and the lowest since the end of 2012. Separately, the Cabinet left is economic assessment unchanged from April–weakness within moderate recovery. It updated its estimate of the recent earthquake damage to JPY2.4-JPY4.6 trillion (~$22-$42 bln) 

The flash eurozone composite PMI slipped marginally to 52.9 from 53.0. The market had expected a small increase. The service component was unchanged at 53.1 while the manufacturing PMI eased to 52.4 from 52.6. The composite appears consistent with 0.4%-0.5% Q2 GDP, which by most estimates, is near trend growth for EMU.  

A worrisome feature is that the forward-looking new orders fell their lowest level since the start of the year. German new orders were at ten -month lows. This warns that the increase in output was to fill the backlog rather than new business. On the other hand, at next week’s ECB meeting, officials may note the first of input prices in five months.