Euro Turns Lower as Risks of Recession Linger

The Euro turned lower for the session following the release of a slew of economic data from the Euro Zone on Monday with the biggest surprise an improvement in risk sentiment. Despite some improvements, the interpretation of the data by the markets does not mean the dangers of recession have been averted.

Euro Zone Investor Morale Rises to Highest Since June

Investor morale in the Euro Zone rose this month to its highest level since June on hopes that mild winter weather and sufficient gas in storage may lessen the chances of a recession, a survey showed Monday.

Sentix’s index for the Euro Zone rose to -21.0 points for December from -30.9 in November, surpassing expectations for analysts for a reading of -27.6, Reuters reported.

Spain Sees Modest Growth in Activity as Sales Improve

According to a news release from S&P Global, “Spain’s service sector recorded a welcome return to growth during November, with both activity and new business expanding since October amid reports of firmer market demand. Employment growth was also registered for a second month running, whilst confidence in the future improved. Price pressures, however, continued to rise sharply, as prices paid for electricity, gas and a suite of other inputs remained elevated.”

Italy Services Downturn Eases in November

S&P Global said, “The downturn in Italy’s service sector eased notably in November, according to the latest PMI data. Although business activity and new orders both continued to fall, amid reports of weak client demand driven in part by the war in Ukraine and inflationary pressures. Rates of contraction both eased. Jobs growth was also sustained for a nineteenth successive month, and at a faster rate.”

France Service Sector Enters Contraction for the First Time since March 2021

“Business activity across France’s service sector fell in November,” according to S&P Global, “marking the first contraction since March 2021 as weakening economic conditions, high inflation and tighter financial conditions hit demand and led some companies to lose clients. A lower intake of new business was also seen in November, while the rate of job creation eased markedly to an 18-month low. Expectations of an imminent recession and concerns over energy prices led business confidence to drop to a two-year low.”

German Services Activity Falls Further in November as Soaring Inflation and Uncertainty Dampen Demand

“The decline in German service sector business activity extended into November, with soaring prices and heightened market uncertainty continuing to weigh on demand,” the latest PMI survey data from S&P Global showed. “Rates of both input cost and output charge inflation continued to run at some of the highest levels on record despite ticking down from the previous month. Businesses maintained a negative outlook for activity in the coming year, although expectations did improve for a second consecutive month.”

Euro Zone Economy Contracts for a Fifth Successive Month in November

“Output levels across the Euro Area shrank once again in November, extending the downturn into a fifth month,” according to S&P Global. “Although the rate of contraction eased for the first time over this sequence due to a slower fall in manufacturing production, this masked an accelerated decline in the Euro Zone’s dominant services sector. Excluding months hit by COVID-19 restrictions, November’s contraction was the second-sharpest since May 2013.