European markets down after disappointing data reinforces growth concerns

European markets drop after disappointing data

LONDON — European stocks fell Thursday after disappointing economic data reignited fears about the recovery in the 16 countries that use the euro.

The euro itself fell too as investors booked profits after a bigger than expected decline in the monthly purchasing managers index, or PMI — a closely watched gauge of business activity.

By late morning London time, the FTSE 100 index of leading British shares was down 46.11 points, or 0.8 percent, at 5,505.80 while Germany’s DAX fell 43.53 points, or 0.7 percent, at 6,164.80. The CAC-40 in France was 37.11 points, or 1 percent, lower at 3,697.95.

European markets had started off fairly brightly after closing lower Wednesday amid unease over the pace of the economic recovery in the U.S. following the Federal Reserve’s latest policy statement.

However, concerns about Europe’s recovery took center stage after the overall PMI, which combines manufacturing and services, fell to 53.8 in September from 56.2 in August. The consensus in the markets was for a far more modest decline to 55.7.

Though the eurozone economy is growing the figures provide evidence that growth has faltered following the surprise spring surge — a reading above 50 indicates growth but the smaller the difference from 50 the lower the growth.

Particularly worrying is that the figures showed that growth in Germany, Europe’s economic powerhouse, has moderated far more rapidly than anticipated — Germany was the main driver behind the 1 percent quarterly growth posted in the eurozone in the second quarter of the year.

“The export-driven uptick seen in the first part of the year is coming to an abrupt halt, as the slowdown in economic activity seen outside the eurozone during the summer has started to affect the single currency area,” said Marie Diron, chief economic adviser to Ernst & Young.

“Eurozone GDP is set to continue to expand during the rest of the year but at a markedly slower pace than in the first half,” she added.

The figures took their toll on the euro too, which was trading 0.5 percent lower on the day at $1.3333.

The euro had previously risen as much as 3 U.S. cents after the Fed said Tuesday it is “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with its mandate.”

Following that statement, the markets are now anticipating that the Fed will turn on the taps once again at its next rate-setting meeting in early November, and that the fresh supply of dollars could lead to further weakness in the currency despite the slowdown in economic growth implicit within Thursday’s figures.

The dollar’s decline Wednesday was not just confined to the euro though. It fell to a low of 84.28 yen, meaning that it has gone a long way to undoing the effects of last week’s unilateral intervention by Japanese authorities in the markets to stem the export-sapping appreciation of the yen.

Even though the dollar advanced modestly to 84.50 yen Thursday, traders remain on the lookout for another intervention from the Japanese monetary authorities — precedent suggests that the Bank of Japan will be back in the markets buying dollars and selling yen.

Wall Street was poised for further losses at the open following Wednesday’s modest retreat — Dow futures were down 55 points, or 0.5 percent, at 10,630 while the broader Standard & Poor’s 500 futures fell 4.6 points, or 0.4 percent, to 1,125.20.

The main point of interest later will be weekly jobless claims and traders will be looking to see if the recent improving picture is sustained.

“The Fed is in data-watching mode given its conditional commitment to ease policy, so perhaps the market’s sensitivity to even second-tier data will be especially heightened,” said Daragh Maher, an analyst at Credit Agricole.

Trading in Asia earlier was subdued as many of the major markets including Japan, mainland China, Hong Kong and South Korea were closed for holidays.

Among markets open in Asia, Australia’s benchmark stock index closed up 0.2 percent to 4,633.6. Key indices in Thailand and the Philippines posted gains, while those in New Zealand, India and Malaysia declined.

Benchmark crude for November delivery was down 54 cents to $74.17 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 26 cents to settle at $74.71 on Wednesday.

Associated Press writer Pamela Sampson in Bangkok contributed to this report.