The eurozone’s economic recovery is showing signs of faltering as the latest Purchasing Managers’ Index (PMI) data reveals a slowdown in business activity, with the composite index falling to 50.8 in June, the lowest level in three months. This unexpected dip has been influenced by heightened uncertainty ahead of the French legislative elections and a notable contraction in France’s economy. Manufacturing, in particular, has been hit hard, with the sector’s index dropping to its lowest in six months. The slowdown has prompted concerns about the eurozone’s economic trajectory and has led to a weakening of the euro against the dollar.In response to the weak PMI data, European stock markets have fallen, with bank and technology stocks among the worst affected. The FTSE Mib index in Milan saw a significant drop, reflecting the broader trend across European bourses. The yield on eurozone government bonds has also declined, signaling market expectations for policy rate cuts. Analysts are closely monitoring the Bank of Japan’s next meeting in July, as it may offer clues about the potential for a rate hike in September.Amidst this backdrop of economic uncertainty, the European Central Bank faces the challenge of balancing its monetary policy to support growth while keeping inflation in check. The market’s focus now shifts to the release of the US PMI data later today, which could have a substantial impact on Wall Street and global markets.
Key points
- Eurozone PMI data indicates a slowdown in economic recovery, with the composite index falling to 50.
- French legislative elections and a decline in manufacturing activity are contributing to economic uncertainty.
- European stock markets and the euro have weakened in response to the disappointing PMI data.
- Bond yields have dropped, hinting at market anticipation of further ECB rate cuts.
8 in June.
