Eurozone ETFs In Focus On Weak PMI Data

Eurozone economy has been going through tough times as third-quarter end approaches on falling demand for goods and services. This is especially true as IHS Markit Composite Purchasing Managers’ Index (PMI) dropped to 50.4 in September from 51.9 in August. This represents the weakest expansion of output across manufacturing and services since June 2013. The persistent global trade disputes and the prolonged process involving the Britain exit from the European Union have been primarily responsible for the slowdown.

The 19-member bloc’s manufacturing sector activity continues to deteriorate and remains in contraction territory this month. Output fell at the sharpest pace since 2012 and service sector expansion also slowed down. Manufacturing PMI dropped to the worst level in nearly seven years in September while services PMI dropped to eight-month lows.

Eurozone's largest economy — Germany — saw the output falling for the first time since April 2013 and the rate of decline hitting the steepest since October 2012. Manufacturing activity suffered the second-largest drop since June 2009 while services growth slipped to the weakest level so far this year. Output growth also slowed to a four-month low in France, Eurozone’s third-largest economy, with manufacturing output falling for the eighth time in the past 12 months and service sector deteriorating to the weakest since May.

Growth in the rest of the euro area hit the lowest since November 2013. Manufacturers witnessed the steepest drop in output since May 2013 while service sector activity growth eased to a four-month low.

Any Hope?

In order to prop up the ailing Eurozone economy, the European Central Bank (ECB) cut interest rates deeper into negative territory and promised an indefinite supply of fresh asset purchases.

The ECB cut the deposit rate by 10 bps to -0.5% and launched a quantitative easing (QE) program set to begin from Nov 1. The QE program will call for asset purchases worth 20 billion euros per month for as long as the economy needs. This marks the second round of QE from the ECB, the first having occurred four years ago.

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