Eurozone government borrowing costs hit record lows
Eurozone government borrowing costs sank to historic lows on Thursday as investors increased bets that the European Central Bank would take aggressive action to avert a deflationary slump, following early data indicating that the region’s recovery slowed in August.
The “flash” purchasing managers’ index for the currency bloc fell from 53.8 in July to 52.8, Markit said, amid signs that geopolitical tensions were hurting sentiment among eurozone manufacturers.
The PMI data “fit with the story of weak growth and low inflation, which make it more likely that the ECB will have to act”, said Alessandro Tentori, head of rates strategy at Citigroup.
Any ECB action to start QE could lead to eurozone government bonds being bought on a large scale.
Chris Williamson, economist at Markit, said the region was on course for growth of 0.3-0.4 per cent in the third quarter, a level “unlikely to stimulate any real turn in the labour market”.
The fall in PMI follows weak gross domestic product figures for the eurozone last week, with the recovery slamming on its brakes in the second quarter. Data suggested its factories were no longer powering the recovery, with the PMI manufacturing reading falling to 50.8.
Source: ft
