U.K. and Eurozone economies potentially shrinking in Q4
The euro zone economy’s decline steepened going into the fourth quarter, as companies across the region endured their toughest month in October since June 2009, business surveys showed on Tuesday. Markit’s Eurozone Composite PMI fell in October to 45.7 from 46.1 in September, down slightly from a preliminary reading of 45.8 two weeks ago and marking its ninth consecutive month below the 50 mark dividing growth from contraction.
The weakness was spread across the euro zone’s major economies, with business activity in the largest market, Germany, also shrivelling at a quicker pace last month. Survey compiler Markit said the latest PMI was consistent with the euro zone economy shrinking at a quarterly rate of around 0.5 percent. If the PMIs fail to improve for November and December, the euro zone economy could easily face a hefty contraction in the fourth quarter rather than the stagnation projected by a median of economists two weeks ago.
Even a steady UK recovery hit a setback yesterday as the October services PMI survey revealed a worrying start to the final quarter of the year. The index fell to 50.6 in October from 52.2 in the previous month, although the reading still signifies growth in activity. This is the lowest reading since December 2010 and follows a disappointing manufacturing Q4 reading.
On the FX markets, the EUR seems to be the worst performing currency so far this month after the CHF. Greek and Spanish concerns are placing a growing weight on the EUR the former due to tomorrow’s vote on austerity measures and the latter due to worsening economic data and a lack of traction towards requesting a bailout and thus activating the European Central Bank’s bond purchase program. EUR/USD fell to a two month low of $1.2765 yesterday. Today markets will be paying close attention to the US presidential election with state polls expected to report from midnight onwards London time.
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