London - Robust German manufacturing indices helped European markets yesterday, though caution remained in evidence just days away from what looks set to be a very close call on the fate of US monetary stimulus.
European stocks started the week in better form than they ended on Friday, as an upturn among Germany’s export-oriented manufacturers offset an unexpected slowdown in France, the bloc’s second-largest economy, to help the euro zone end the year on a high.
“It’s really encouraging to see the increase in the overall rate of growth,” said Chris Williamson, the chief economist at Markit, which compiles the widely watched purchasing managers’ index (PMI) surveys.
“It’s a reassuring signal that the recovery is still on track. We are not losing momentum.”
Bloomberg reported that the euro zone PMI increased to a 31-month high of 52.7, from 51.6 in November. That was above expectations of 51.9. Manufacturing output in Germany reached a 30-month high, while in France production fell to a seven-month low.
Jan von Gerich, a strategist at Nordea, stressed the PMI figures were likely to be little more than a diversion, with so much going on this week.
The Federal Reserve will meet today and tomorrow to discuss winding down its bond buying. Opinion remains divided on whether it will move this week or wait until January – or even March.
Also due for release today were US inflation figures, “which will probably shape the final expectations going into the meeting because that has been one of the things that has been holding the Fed back”, Von Gerich said.
“Some of the recent data has suggested the weakest inflation is behind us, but it has not all been that way… so [on tapering expectations] a downside surprise will have a bigger impact than an upside surprise.”
One of the standout moves in world markets yesterday was Shanghai, where stocks fell 1.6 percent after a measure of growth in China’s factory sector slowed to a three-month low in December.
Bloomberg reported that the preliminary reading of 50.5 for the PMI released yesterday by Markit and HSBC Holdings compared with 50.8 in November and predictions of 50.9.
Japan’s Nikkei index also lost 1.6 percent despite a generally upbeat survey of the business sector. Confidence among big manufacturers improved to the highest level in six years, the survey from the Bank of Japan showed. – Reuters