French PMI Rises to Expansion as Europe Surges

A resurgence of activity in France helped euro zone businesses expand at their fastest rate in four years this month, the clearest sign yet that the European Central Bank’s stimulus is driving a solid recovery in the region.

But loose monetary policy in China and Japan failed to prevent factory activity there from contracting, Purchasing Managers Index (PMI) surveys showed.

Coming at a time when financial markets are transfixed by the stand-off between Greece and its creditors, the PMIs painted a mixed picture for the global economy and are likely to reinforce calls for accommodative monetary policy.

In the United States, where interest rates are set to rise by year-end for the first time in almost a decade, a survey later on Tuesday is expected to show factory activity in the world’s biggest economy quickened in June.

The ECB is buying 60 billion euros of mostly sovereign bonds each month to boost growth and inflation in the euro zone. The latest data suggests that stimulus has started impacting business sentiment, even if only slightly.

“We’ve got a decent pickup in the services sector, which is indicative that domestic activity is beginning to rally,” said Peter Dixon, economist at Commerzbank.

“It clearly does indicate that after all the travails of the past few years there are some positive shoots springing up in the euro zone. There are structural problems but maybe, just maybe, we’ve turned a corner.”

Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, surged to a four-year high of 54.1 from 53.5.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza