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Europe Ahead: PMI Manufacturing and Services Day in Euro Zone
Written by article default Thursday, 23 September 2010 05:52
After the absence of fundamentals from Euro zone’s economic calendar, the manufacturing and services sector returns to the spotlight where Germany and Euro-Zone’s PMI take center stage following two-day domination from US and UK’s central banks on the calendar.Lack of fundamentals over the past few days intensified investors demand for safety, enabling gold to set historic new highs amid uncertainty about the outlook of global recovery; in addition, the dollar extended its depreciation against majors, which would benefit US exports on the short and medium terms.
The Federal Reserve and Bank of England both dominated the scene over the past two-days, while both signaled that economic recovery is slowing down and conditions are easing. Nonetheless, both banks hinted for the possibility of providing markets with further stimulus measures in order to sustain and boost the easing recovery.
The Biggest economy in Europe will present its advanced September reading PMI Manufacturing and Services sectors. The survey is based on a poll of three thousand companies.
Expectations signal that both sectors will witness a drop in activities, reaching 57.6 and 57.2 respectively. A reading above 50 is still considered an expansion but a strong euro versus the dollar would weigh on exports, and thereby affects manufacturing activities in the country.
Furthermore, the same reports from the Euro-Zone is projected to show the same, with PMI manufacturing report to drop to 54.5, while the PMI Services to dip to 55.5 from 55.9.
Since these sectors remain in expansion, this give us evidence that production output is easing, which would weigh on the outlook of the euro zone.
Investors’ fear from the outlook of global economies caused downside pressures on growth. Expectations signal that the Federal Reserve will probably slash its growth forecast while Europe’s bailout plan is failing to support growth therefore; additional cut in growth projections for Euro-Zone economies and UK is highly anticipated in the upcoming days.
The Confederation of British Industries slashed its forecasts for UK’s 2011 growth rates to 2.0 percent, while raising it for 2010. But easing conditions in the US might force the bank to provide financial markets with further stimulus that would devalue the dollar, accordingly, negatively affecting the shared European currency and the pound to rise.
Economic woes are spreading in Europe as fears from deterioration in the banking sector returned to haunt investors’ state of mind. Greece, Iceland, Ireland, Portugal and Spain are nearing danger levels as a failure to reduce risk spread send a strong signal that stimulus measures provided by the governments of EU has failed.
The bottom line is Euro-Zone’s output growth remains solid, but conditions improved in the first half of this year in the European continent was led by the decline of the Euro and the Pound against most majors, but by the start of the second half of this year, the table turned and both currencies gained, accordingly, hammering down activities in Europe.