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Eurozone manufacturing contraction eases Stock markets rise on manufacturing data
(40 minutes later)
The eurozone's manufacturing sector contracted for the sixth month in a row in January, a closely-watched survey has indicated, although the rate of contraction slowed. Promising figures for manufacturing output in economies throughout the world have boosted global stock markets.
href="http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9078" >Markit's purchasing managers' index (PMI) for the eurozone rose to 48.8, up from December's figure of 46.9. In the US, the ISM manufacturing index rose to 54.1, the strongest reading for seven months. A reading above 50 implies expansion.
However, a reading below 50 still implies that the sector shrank. In the eurozone, href="http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9078" >Markit's purchasing managers' index (PMI) rose to 48.8, up from December's figure of 46.9.
The survey found German manufacturing returned to growth, while the declines in Spain and Italy slowed. European markets were up by about 2%, while in the US the Dow was up 1.2%.
"Euro area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession," said Chris Williamson, chief economist at Markit. "The US manufacturing sector gained further growth momentum in January, adding to a raft of business surveys around the world that have signalled a better than expected start to 2012 for many countries," said Chris Williamson, chief economist at Markit.
"The latest survey readings suggest that conditions in the euro area manufacturing sector have begun to stabilise in recent weeks after a difficult end to 2011," said James Ashley at RBC. Jerry Harris, president of asset management at Sterne Agee, said the ISM index figure showed the US economy was "doing pretty good".
"Output in January was slightly stronger than in December, and employment levels were unchanged on the month. "It is better than last month, and very acceptable. Even though it was slightly below expectations it was a good number," he said.
European manufacturing
The eurozone survey found German manufacturing returned to growth, while the declines in Spain and Italy slowed.
"Euro area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession," said Mr Williamson.
James Ashley at RBC said: "The latest survey readings suggest that conditions in the euro area manufacturing sector have begun to stabilise in recent weeks after a difficult end to 2011."
"Output in January was slightly stronger than in December, and employment levels were unchanged on the month."
The more optimistic data was reflected in the major European stock markets.The more optimistic data was reflected in the major European stock markets.
At lunchtime, Germany's Dax index was up more than 2%, while the leading French markets was 1.5% higher. In afternoon trading, Germany's Dax index was up more than 2%, while French Cac 40 was 1.9% higher.
They were also helped by better-than-expected figures showing an expansion in Chinese manufacturing activity. Markets were also helped by better-than-expected figures showing an expansion in Chinese manufacturing activity.
In the UK, where manufacturing activity was the strongest for eight months, the FTSE was up 1.4%.In the UK, where manufacturing activity was the strongest for eight months, the FTSE was up 1.4%.
'Shallow recession''Shallow recession'
Germany's PMI reading rose to 51, the highest level for six months.Germany's PMI reading rose to 51, the highest level for six months.
In Italy, the manufacturing PMI reading rose to 46.8, the best reading for four months, while in Spain the reading of 45.1 was the highest for five months.In Italy, the manufacturing PMI reading rose to 46.8, the best reading for four months, while in Spain the reading of 45.1 was the highest for five months.
However, in France the reading fell to 48.5, and Greece's level of 41 implied that production there was falling at the fastest pace in the survey's history, Markit said.However, in France the reading fell to 48.5, and Greece's level of 41 implied that production there was falling at the fastest pace in the survey's history, Markit said.
Gilles Moec, co-head of European economic research at Deutsche Bank, said: "The rebound in the PMI strengthens a 'shallow recession scenario'. That the periphery also rebounded in January is probably the best message from this batch."Gilles Moec, co-head of European economic research at Deutsche Bank, said: "The rebound in the PMI strengthens a 'shallow recession scenario'. That the periphery also rebounded in January is probably the best message from this batch."
However, the Markit survey also found that new orders declined in all eurozone nations except for Austria.However, the Markit survey also found that new orders declined in all eurozone nations except for Austria.
"The concern is that new orders have yet to return to growth, even in Germany, suggesting that companies will be reluctant to expand capacity and take on more staff until signs of stronger demand have appeared," Mr Williamson said. "The concern is that new orders have yet to return to growth, even in Germany, suggesting that companies will be reluctant to expand capacity and take on more staff until signs of stronger demand have appeared," Markit's Mr Williamson said.