Eurozone stocks turn lower as PMIs remain in contraction

European stocks opened higher but soon some of the mainland indices dipped into the negative, taking a breather from their relentless, but somewhat lethargic, rally. US futures were trading near their highs after another rally on Wall Street pushed the major indices near key technical levels, despite growth concerns over China and ahead of the release of FOMC minutes.

The latest macroeconomic data from Europe continues to paint a grim picture with the flash manufacturing and services PMIs for France and Germany, and Eurozone as a whole, remaining in the contraction territory of below 50. Although the PMI data still managed to beat expectations, that’s only because we are seeing improvement from a very low base. Activity at the Eurozone’s largest economies remain rooted deeply in negative territory, due to the soaring cost of living, rising interest rates and elevated levels of uncertainty.

PMI data recap - all in contraction:

Eurozone flash services PMI 48.6 vs 48.0 expected
Eurozone manufacturing PMI: 47.3 vs. 46.0 expected
German Services PMI fell to 46.4 in line with expectations from 46.5. Manufacturing PMI 46.7 vs 44.9 eyed
France's services PMI missed at 49.4 vs 50.6 expected, but manufacturing beat at 49.1 vs. 46.9 eyed

So, the latest PMIs show some improvement from October but remain in contraction as demand conditions continue to be impacted by strong inflation. German manufacturers reported another sharp decline in new orders, which is not a great sign. So, Germany is still heading for a recession, but perhaps the contraction might be shallower than previously expected.

S&P Global notes that “… underlying demand continues to weaken rapidly, linked to sharp price increases and hesitancy among customers, with the downturn in service sector new business even gathering pace to the quickest since May 2020.” While there were some positive signs in the report, thanks in part to a mild autumn, “expectations have merely improved from ultra-low levels, meaning they are still rooted deeply in negative territory as firms continue to highlight concerns about the soaring cost of living, rising interest rates and still-high uncertainty.”

The latest PMI data comes after the European Central Bank Vice-President Luis de Guindos warned earlier this morning that the Eurozone economy will likely show negative growth rates in the fourth quarter while inflation will still remain high before starting to slow down in the first quarter.

Despite uncertainty over the economy, Europe’s major indices have rallied sharply in the last couple of months. The Euro Stoxx 50 index is among several others that have now reached technical levels where you would expect to see some consolidation or a pullback from.

The Euro Stoxx 50 has entered into the 3925 to 4000 resistance zone, where previous support and resistance meets the 61.8% Fibonacci retracement level. While it is possible we could see some weakness here, that’s not going to get the bears excited too much until we see some short-term lower lows. The most recent short-term low comes in at 3842. So, as a minimum, this level will now need to break if we are to see any serious bearish moves.

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

Open a Forex.com account, or log-in if you’re already a customer.
Search for the pair you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels.
Place the trade.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.