European Markets  The major European markets are declining sharply on Tuesday, with the key averages in the region opening modestly lower and seeing further losses in the session. The French CAC 40 Index and theGerman DAX Index are receding 2.01% and 1.72%, respectively, while the U.K.’s FTSE 100 Index is down 1.96%.
Oil giant BP is trading sharply lower after its ‘Top Kill’ operation to plug the leaking oil well in the Gulf of Mexico region failed. The company is reportedly trying a new method to stall the spill.
On the economic front, Eurostat reported that the jobless rate in the euro zone region rose 0.1 points to 10.1% in April, while economists had expected the rate to hold steady at 10%.
Meanwhile, Germany’s Federal Labor Agency said the number of unemployed individuals in Germany fell 45,000 in May, while economists estimated a more modest drop of 18,000. The jobless rate fell to 7.7% on a seasonally adjusted basis from 7.8% in the previous month. Additionally, the ILO unemployment rate harmonized across the European Union slid to 7.1% from 7.6%.
German retail sales rose 1% month-over-month in April in real terms, according to a report released by the German Federal Statistical Office. The retail sales growth was in line with expectations. However, retail sales fell 3.1% in real terms, reversing the 3.7% increase in the previous month.
The results of a private sector manufacturing survey showed that the manufacturing purchasing managers’ index for the euro area fell to 55.8 in May, lower than the flash estimate of 55.9 and the month-ago reading of 57.6, which represented the highest level in four years. All member countries showed deterioration in output and new order growth.
The Markit/CADF French manufacturing purchasing managers’ index fell to 55.8 in May from 56.6 in April. At the same time, the German BME manufacturing purchasing managers’ index was upwardly revised to 58.4 in May from the flash estimate of 58.3. In April, the index was at 61.6. However, the Markit/CIPS Purchasing Managers' Index for the U.K. signaled a continuation of the solid rebound in the manufacturing sector. The index stood at 58 in May, in line with April's reading. Economists had expected the index to fall to 57.9 in May.
 U.S. Economic Reports
With the euro zone crisis leading to some uncertainty over the sustainability of the recovery that is underway in the U.S., all eyes are likely to be trained on the jobs report to be released during the upcoming week. The monthly non-farm payrolls report for May, the ADP’s private sector employment report, the weekly jobless claims report and the results of the Institute for Supply Management’s manufacturing and non-manufacturing surveys for May are likely to be on most traders’ radar.
The construction spending report for April, auto sales for May, the pending home sales index for April, the factory goods orders for April and the Fed speeches scheduled for the week round up the other Main Street events of the week. Given the lackluster results of the Treasury auctions held in the week ended May 28th, announcements concerning the auctions of 6-year, 3-year and 10-year, all due on Thursday, may also generate some interest.
The ISM’s survey is expected to show a decline in the manufacturing index below the ’60’ level it had topped in April, given the weak results of the regional manufacturing surveys for May. That said, the softness represents only a slight loss of momentum, with the manufacturing sector still in expansion mode. BMO Capital Markets expects the employment index to show that manufacturers are still hiring, while the export orders index may see some downside due to the recent rally in the U.S. dollar.
At the same time, the non-manufacturing index compiled by the Institute may show an uptick, with the employment index of the survey likely to rise above 50 for the first time since December 2007.
Hiring related to census 2010 should give a solid boost to non-farm payrolls in May. In April, payroll employment rose for the fourth straight month, with April’s increase primarily reflecting private sector hiring. A census-related hiring boost could pull the unemployment rate down in May even if the labor force continues to expand due to previously discouraged workers coming into the labor market.
Individual automakers are also scheduled to release their monthly U.S. sales results for May. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month.
Auto sales should benefit from month-end Memorial Day incentives. Consequently, sales are expected to edge up to a seasonally adjusted annual rare of 11.3 million units in May from 11.2 million units in April.
The results of the manufacturing survey of the Institute for Supply Management, which are based on data compiled from purchasing and supply executives nationwide, are due out at 10 AM ET. Economists expect the index to show a reading of 59.4 for May.
In April, conditions in the manufacturing sector continued to improve. The headline purchasing managers index rose to 60.4 in April from 59.6 in March and was also higher than the consensus estimate of 60. The new orders index rose 4.2 points to 65.7 and the production index increased 5.8 points to 66.9, but the order backlogs index eased 0.5 points to 57.5. Signaling that the job market is strengthening, the employment index rose 3.4 points to 58.5.
The Commerce Department's construction spending report to be released at 10 AM ET is expected to show 0.1% growth in spending for May.
Construction spending rose 0.2% month-over-month in April, with the increase aided by a 2.3% jump in spending on public construction. On the other hand, private construction spending declined 0.9%. The weakness in private construction was centered on multi-family construction spending and private non-residential construction spending, while fell by 6.3% and 0.7%, respectively.
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