Commenting on the shocking drop in Eurozone business activity, IHS Markit’s chief business economist Chris Williamson says:
The data indicate that the eurozone economy is already contracting at an annualised rate approaching 10%, with worse inevitably to come in the near future.
The service sector is currently seeing an especially severe impact from the COVID-19 outbreak, with travel, tourism, restaurants and other leisure activities all hit hard by virus containment measures.
No countries are escaping the severe downturn in business activity, but the especially steep decline in of Italy’s service sector PMI to just 17.4 likely gives a taste of things to come for other countries as closures and lockdowns become more prevalent and more strictly enforced in coming months.
Eurozone activity sees largest single month drop in March
A combined reading of the Eurozone’s manufacturing and services sectors shows the biggest ever single monthly fall in March.
The composite PMI reading was the lowest ever recorded as part of the survey, at 29.7.
That was not only down from February’s 51.6, it was also weaker than the earlier flash estimate of 31.4.
French services activity hits a record low, German faces historic contraction
More PMI data makes for grim reading of Europe’s economic outlook:
Correction: In my intro, I’ve corrected the Caixin services sector data which came out this morning. The reading was 43.0, signalling a contraction, but at a slower rate than February when the reading was 26.5.
Italy’s services sector battered by Covid-19 outbreak
Italy, which is has suffered most from the Covid-19 outbreak in Europe, experienced a sharp contraction across its services industry last month.
Italy’s services PMI came in at 17.4 compared to a Reuters poll forecasting a reading of 22.0. That’s a significant fall from February when it was still in expansion territory at 52.1.
In a broader view of industry performance, Italy’s composite PMI plunged from 50.7 in February to 20.2 in March.
With minutes to go until our next PMI reading (next up: Italy), time to check in on oil prices.
Despite slipping overnight, Brent prices are back up over the 30-dollar mark, rising more than 1.7% on the session to $30.52.
You’ll remember yesterday’s whopping 30% jump in prices, following Donald Trump’s tweet, which suggested that both Russia and Saudi Arabia might be ready to cut output by as much as 15m barrels a day.
Those comments were (slightly) dampened after Putin’s spokesman reportedly told journalists that “no one has started talking about any specific or even abstract deals”.
And in the first of a string of PMI data out this morning, Spain’s services sector performed worse than expected in March.
Economists had been expecting a reading of 25.5, according to a Reuters poll. But even that wasn’t pessimistic enough, with the actual figure coming in at 23.0, down from 52.1 a month earlier.
A reminder that 50 is the neutral reading, and any reading below signals a contraction in the sector.
It’s a bit of a mixed bag of companies that are making up the biggest fallers on the FTSE 100 this morning:
European stock markets are open and have followed Asia’s lead into negative territory:
- FTSE 100 down -0.7%
- Germany’s DAX down -0.4%
- France’s CAC 40 down -0.4%
- Spain’s IBEX down -0.2%
And Europe’s STOXX 600 has fallen 0.4%
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Despite a positive end to trading on Wall Street, new services PMI data out of China has hit sentiment and sent Asian stocks and US futures back into the red.
The Caixin services PMI showed the country that first bore the brunt of the coronavirus outbreak is still struggling to return to normalcy.
The reading of 43 was up from 26.5 a month earlier. It shows a sector still struggling to reach expansion territory, and one which is nowhere near the levels of growth that economists have come to expect from the Asian nation.
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, explains:
Stocks in Tokyo, Shanghai, Hong Kong and Sydney traded in the red, as all three US majors were pulled lower. The Caixin services PMI confirmed a slower contraction in the Chinese activity, but the number also illustrated that life in China has certainly not gotten to a normal pace just yet, with the manufacturing being an exception to this.
We will be keeping an eye on a swathe of data out of Europe and the US, which is expected to confirm a sharp contraction in economic activity and employment.
Here’s what we’re expecting today:
8:15am BST: Spain services PMI for March
8.45am BST: Italian services PMI for March
8.50am BST: French services PMI for March (final reading)
9.00am BST: Eurozone services and composite PMI for March (final reading)
9.30am BST: UK services and composite PMI for March (final reading)
13.30pm BST: US non-farm payrolls for March