THE TAKEAWAY: Eurozone PMIs well below 50 boom-bust line -> Europe scrambles to stimulate growth as recent Fed comments suggest crisis not over -> Euro suffers on weak data
Manufacturing and services purchasing manager’s index numbers out of Europe came in a good deal weaker than expected today. The all-inclusive Euro-area PMI composite indicator came in at 48.7 versus the 49.6 predicted by economists. Eurozone PMI manufacturing was 47.7 versus the expected 49.5, and the services sector index came in 48.7 at versus the expected 49.2. A reading below 50 indicates market contraction.
European powerhouses Germany and France both saw significantly weaker than expected numbers, with the German manufacturing index falling to 48.1 from February’s 50.2. French numbers were similarly risk-negative. Elsewhere, the Chinese HSBC PMI released overnight also came in below expectations, further weakening risk appetite into the European session open.
Today’s numbers may suggest to some that Europe’s financial crisis is far from over is far from over, and will likely throw a damper on recent optimistic comments from European officials. The ECB’s Assmusen yesterday mentioned that it is time for the European Central Bank to gradually exit crisis mode, but investors will likely be keen for the central bank to continue its long term refinancing operations which are meant to encourage economic growth by making cash available to banks.
Meanwhile, all eyes remain on America’s Federal Reserve, with Chairman Bernanke yesterday weighing in on the European situation saying that “further strengthening of the European banking system” would be required as the region faces the risks of a prolonged recession.
The Euro plummeted nearly 80 points within the hour as today’s weak PMI numbers diminished confidence in the single currency.
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