By Geoffrey Smith
Investing.com -- Europe’s stock markets gave up early gains on Friday as a closer look at preliminary purchasing managers indices for the euro zone showed no meaningful improvement in an economy still badly burdened by the U.S.’s ongoing trade conflict with China.
IHS Markit’s composite PMI for the euro zone fell to 50.3 from 50.6 in October, disappointing hopes for an improvement to 50.9. While surveys for France and Germany both showed pockets of life – the manufacturing PMIs were stronger than expected in both countries – service activity slowed more sharply.
IHS Markit economist Chris Williamson warned that the slowdown had broadened significantly both by sector and geographically.
“Resilient jobs growth had provided a key support to the more domestically-focused service sector earlier in the year, but with employment now rising at its slowest pace since early-2015, it’s not surprising to see the service sector now also struggling,” Williamson said in a statement. He added that the figures suggest an expansion of no better than 0.1% in the final quarter of the year.
Elsewhere, in her first keynote speech since taking office, new European Central Bank President Christine Lagarde appeared to promise continuity rather than any abrupt break with the policy of her predecessor Mario Draghi. Her speech stressed the importance of completing the euro zone’s institutional framework and the importance of raising productivity through more investment, notably by governments. Those are points on which Draghi nagged euro zone governments for years without much visible progress.
Lagarde repeated that she’ll be overseeing a strategic review of the bank’s monetary policy in the near future, which analysts say may challenge some long-held precepts such as the bank’s definition of “price stability”.
Bank stocks, at least, appeared reassured that there was no language which suggested any further near-term easing of monetary policy that would push interest rates further into negative territory and put even more pressure on their profits. The ECB's semi-annual Financial Stability Review, released earlier in the week, had warned with unusual frankness about the harmful side-effects of its interest-rate policy on the banking sector.
Spain’s Bankia (MC:BKIA) was the biggest gainer, rising 2.1%, while Santander (MC:SAN), BBVA (MC:BBVA), ING Groep (AS:INGA) and Commerzbank (DE:CBKG) all rose more than 1% initially before giving up some of their gains.