Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Recessionary Winds are Blowing in Europe

Tuesday, 25 October 2011

Recessionary Winds are Blowing in Europe

(Pic by The Welsh Poppy Via Flickr)
It is now official. Europe is sliding into recession and it might not be alone. The latest data for the composite Purchasing Managers Index (P.M.I.), a reliable indicator for G.D.P. trends, confirms the heat is on.

In October, for the second month in a row, the P.M.I. has declined below the benchmark of 50 to 47.2. Both the manufacturing and service sectors are in red. Firms are careful about investing. Hiring is on hold.

In effect, the sentiment is expected to contract in the coming months as well. The new order index, which anticipates future activity, fell to the lowest level since 2009. Only Germany is holding up well for now. The PMI was 51.2, up from 50.5 in September. In France, at the contrary, it printed 46.8, the lowest level in more than 2 years.

 The PMI index is just the last report signalling an important contraction is underway in Europe. Economists are now forecasting growth to be near 0 in the last quarter of the year. Last week, the IFO business climate fell for the fourth consecutive time since June 2011. It is now at the lowest of the past 17 months.

Business and consumer confidence are evaporating everywhere. In the U.S., the Conference Board index slumped to the slowest level since March 2009. The main concerns remain jobs and incomes.

How about the financial markets?

The S&P 500 is rebounding from the lows. The next resistance is 1260/70. A breakout failure could take the price to 1060 and eventually 850. A move above 1350 could target 1400 and possibly 1500.

The Euro/Usd could instead stretch up to 1.40/1.4150, where various lines of resistance meet. A breakout failure could quickly take the price back to 1.33 and eventually 1.26.

Angelo Airaghi,

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