Markets hurt in the wake of poor EZ figures

The flood of negative figures has led European markets to lose ground and forced analysts to revise growth forecasts for the EZ. The main European indexes registered falls close to 1.5% and most economists downgraded expectations for Q3. The most optimistic foresee a 0.1% growth whereas more gloomy forecasters estimate a figure of 0% or worse.

The decline in confidence has been significant in Germany (1.1% points), The Netherlands (1.2%), France (1.6%), while sentiment rose slightly in Italy (0.1%), the other economy driving the EZ. Bucking the trend Spain showed a 1.3% improvement in September, although its confidence index remains below the EZ average (84.1 points).

The survey demonstrates a notable and worrying fall of industrial sector confidence, which began in the first months of the year due to deterioration in exports. Worse still, this drop in confidence now appears to have spread to the financial and services sector. Construction stands out as the only sector that is improving.

Experts forecast a slowing in the decline of exports thanks to Euro fall 10 bpdown EUR/USD since last June. The latest index release coincides with ECB President Mario Draghi´s pessimistic messages regarding EZ recovery. From “low inflation problems” we now have drastic action planned from the central bank, who will also seek structural reforms before moving ahead with fiscal incentives from governments.

The worsening landscape across the EZ compelled Spanish Finance Minister Luis de Guindos to alter his speech. From “Spain is the European economy growing the most” to “Spain is not immune to EZ slowing down”. Everything suggests the Government might soon cut back its GDP growth forecasts.