The euro zone continues its rip-roaring start to the year with the publication of better than expected preliminary purchasing managers’ index (PMI) data which shows the composite (manufacturing and services) output in the region rising for the third month in a row.
According to Markit, trends were far more varied by country, notably among the two largest euro member states, Germany and France. While output across both manufacturing and services grew at their fastest rate for a year in Germany, French companies reported the steepest downturn since March 2009.
Markit Chief Economist Chris Williamson explains that the data shows a clear easing of the economic downturn in the euro zone at the start of 2013 and that “the outlook has brightened with January seeing the smallest drop in business activity since last March”.
In the meantime, peripheral European sovereign bond yields continue to fall as Portugal made a successful return to the markets after a 2 year absence. The Portuguese Treasury issued 5 year bonds for €2.5 billion, its first long-dated bond issue since Portugal accepted a bail-out in 2011. The bond sale yielded 4.891% and was well over-subscribed, generated bids worth a total of €12 billion.
Earlier this week, Spain held two bond auctions which were also well attended.
This morning sees the publication of GDP data for the UK for the fourth and last quarter of 2012. Ahead of the announcement, Chancellor George Osborne insists he will press ahead with the government's austerity plans despite being warned by the International Monetary Fund this week that the chancellor should slow the pace of cuts. Osborne said the credibility Britain had built up by setting out a tough package of tax rises and spending plans had been "hard won, and easily lost", adding that it would be "a huge mistake to put that at risk". By contrast, the IMF's chief economist, Olivier Blanchard, said the time had come for the chancellor to act on the Fund's repeated warnings that if the economy remained weak he should moderate his plans.
Overnight, the S&P 500 index in New York touched a 1500 level for the first time since December 2007 after a survey revealed Chinese manufacturing expanded at the fastest rate in two years this month.