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     LONDON (MNI) - Eurozone IP Expected to Slump in June: Industrial output in
the EZ is forecast to decline in June after May's rebound. Markets look for IP
to plummet by 1.5% m/m which would leave Q2's growth rate at -0.5% after Q1's
0.9% quarterly gain. The annual rate is projected to post the fourth negative
rate in a row, leaving the indicator at a six-month low.
     State-Level Data Suggests Downside Risk: Industrial Production (ex.
construction) declined m/m in all the Big Four member states in June: Germany
(-1.8%); France (-2.3%); Italy (-0.2%) and Spain (-0.2%). These countries
together account for 75.1% of total Eurozone industrial output.
     Markets Over-Pessimistic in Recent Years: Analysts have underestimated the
monthly change in June's EZ output in the past four years, while they
overestimated it between 2010 and 2014.
     Fwd-looking Indicators Paint A Gloomy Picture: July's manufacturing PMI
registered another decline (down 1.1pt to 46.5), leaving the indicator in
contraction territory for the sixth consecutive month. Output and new orders saw
significant shortfalls, hitting the lowest levels since Dec 2012. A development
confirmed by the recent EC Economic Sentiment Indicator which revealed a
71-month low of confidence within the industrial sector.
     Global Uncertainties Continue to Loom Large: The re-escalation of the
US-China trade dispute, the rising risk of a no-deal Brexit and the imminent
threat of auto tariffs possibly imposed by the US continue to create a difficult
environment for manufacturers. The EZ's largest economy, Germany, remains a
source of weakness as it is the most exposed to external developments among the
Big Four member states. Germany's manufacturing sector remains stuck in
recession, despite the recent uptick in industrial orders which provides little
cause for hope. 
--MNI London Bureau; +44 0203 865 3814; email: