More Weakness in Euro Zone Manufacturing, Market Indexes Struggle

Arthi Gupta
02 Nov, 2012
New York City

The European indexes traded sideways ahead of the U.S. payrolls report. The downturn in the euro zone manufacturing sector extended in October. The UK construction sector remained subdued in October.

[R]1:30 PM Frankfurt – The European indexes traded sideways ahead of the U.S. payrolls report. The downturn in the euro zone manufacturing sector extended in October. The UK construction sector remained subdued in October.[/R]

European indexes struggled to hold on to a 2-week high after the latest manufacturing data across the region showed further decline in growth rates and German manufacturing growth shrank for the eighth month in a row.

Markets in the region have rallied more than 4% after the European Central Bank pledged to defend the euro at all costs but mixed earnings have tempered the sentiment.

Telecom stocks were under pressure today after media speculation that Deutsche Telekom may cut its dividend sharply after Telefonica and France Telecom lowered their payouts. Beiersdorf AG gained after it reported better results on improved sales in emerging markets.

The UK economy will contract slightly this year and is likely to grow just over 1% in 2013, the National Institute of Economic and Social Research said in a quarterly report.

The report estimated consumer price inflation to reach 2.7% this year and 2% in 2013.

The Romanian central bank decided to keep the monetary policy rate unchanged at 5.25%, as expected.

In Paris trading, the CAC-40 Index dipped 4.49 or 0.1% to 3,470.91 and in Frankfurt the DAX Index edged higher 2.43 or 0.04% to 7,337.92.

For the week, the CAC-40 Index gained 1% and the DAX Index rose 1.5%.

The yields on Spain’s benchmark 10-year were at 5.59%. Italian 10-year yield were at 4.929%.

Euro Area Manufacturing Drops

The downturn in the euro zone manufacturing sector extended into a fifteenth successive month in October, final data released by Markit Economics showed today.

The seasonally adjusted purchasing managers'' index fell to 45.4 in October from 46.1 in September, slightly above the earlier flash estimate of 45.3.

German Manufacturing Output Falls

Germany''s manufacturing output dropped for the eighth consecutive month in October, final survey data released by Markit Economics showed today.

The Markit/BME Germany Purchasing Managers'' Index fell to 46 in October from 47.4 in September, higher than the flash estimate of 45.7.

Sector data showed that worsening operating conditions in October were concentrated in intermediate and investment goods.

French Manufacturing Output Rises

Separately, there was a marked deterioration in the health of France’s manufacturing sector during October, according to survey results by Markit Economics released today.

The headline purchasing managers'' index, a seasonally adjusted index designed to measure the performance of the manufacturing economy, rose to 43.7 in October from 42.7 in September.

A lack of incoming new orders was again a key factor hampering French manufacturers during October.

Italian, Spanish Manufacturing Data

Italy’s manufacturing sector remained in contraction mode at the start of the fourth quarter, with both output and new work decreasing solidly over the month, data from a survey by Markit Economics and ADACI showed.

The seasonally adjusted purchasing managers'' index for the manufacturing sector dropped to 45.5 in October from 45.7 in September.

Separately, the ongoing Spanish economic crisis continued to impact negatively on the manufacturing sector in October, data from a survey by Markit Economics showed.

The seasonally adjusted purchasing managers'' index for the manufacturing sector dropped to 43.5 in October from 44.5 in September.

UK Construction Subdued

The UK construction sector showed a subdued trend in output levels alongside moderate reductions in new work and employment in October, data released by Markit Economics showed today.

The seasonally adjusted purchasing managers'' index for the construction sector increased to 50.9 in October from 49.5 in September.