A RAFT of downbeat data from around the world yesterday pointed to a tough time for the private sector in the last month.
America’s manufacturers experienced the slowest pace of growth for six months in April. Markit’s initial purchasing managers’ index (PMI) fell from 54.6 to 52, just two points from the boundary between growth and contraction.
The data “raises concerns that the US manufacturing expansion is losing momentum rapidly as business and households worry about the impact of tax hikes and government spending cuts”, according to Chris Williamson, chief economist at Markit.
And the Eurozone’s biggest nations showed fresh signs of recession. Germany’s composite PMI reading fell sharply to 48.8, a surprise swing into contraction and the lowest reading since October.
Adding to the gloom, today’s survey from Ifo is expected to show that German business confidence fell in the last month.
France’s PMI score improved during April but remained well below the threshold for growth at 44.2, Markit figures showed.
The Eurozone as a whole remained firmly in recession, with a composite PMI reading of just 46.5.
Earlier in the day Markit and HSBC revealed that China’s flash manufacturing PMI reading slipped to a lower-than-expected 50.5 in April, a two-month low.
European equities rose, however, as traders bought into the prospect of an interest rate cut that would attempt to boost output.
“The data will strengthen the hands of the doves on the European Central Bank’s governing council in arguing the case for a rate cut and/or additional unconventional policy measures,” said ING economist Martin van Vliet.
The euro dipped below $1.30 in response to the downbeat figures.
The ECB will meet next week to consider cutting the base rate from 0.75 per cent.
The jump in European equities yesterday was also aided by strong bond auctions in Spain and yields falling on Italian bonds. Italy’s President Giorgio Napolitano held urgent talks yesterday aimed at naming a Prime Minister to head a coalition government, raising hopes that an end to the country’s political deadlock is in sight.