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European Stocks Pressured by Coronavirus Fears; Euro Zone PMIs Show Better Growth

European shares slumped on Friday, as investors monitored the latest developments in the coronavirus outbreak. Traders generally followed the lead in Asia which was mostly lower across the board. Basic resources stocks lost the most, but all sectors on all major bourses are being pressured. The biggest concern for investors is the spreading of the coronavirus outside of China.

At 11:34 GMT, the U.K.’s FTSE 100 Index is trading 7416.93, down 19.71 or -0.27%. Germany’s DAX is at 13640.50, down 23.50 or -0.17% and France’s CAC is at 6043.11, down 19.19 or -0.32%.

Economic News

CNBC reported that leaders of the 27 EU member states failed to make any headway in budget talks on Thursday. The U.K.’s departure from the bloc last month is projected to leave a £55 billion ($71.3 billion) hole in the EU’s coffers over the next seven years.

Business activity in the Euro Zone accelerated more than expected this month, a business survey showed on Friday, in welcome news for policymakers at the European Central Bank who are battling to revive growth and chronically low inflation.

Euro Zone February Business Growth Better than Expected

IHS Markit’s Euro Zone Composite Flash Purchasing Manager’s Index (PMI), seen as a good gauge of economic health, rose to 51.6 in February from January’s final reading of 51.3, beating all forecasts in a Reuters poll which had a median prediction of 51.0. Anything above 50 indicates growth.

“The Euro Zone economy managed to pick up some momentum again in February despite many companies having been disrupted in various ways by the coronavirus, which caused supply problems,” said Chris Williamson, chief business economist at IHS Markit.

Demand remained relatively strong, suggesting there won’t be a deterioration next month. The new business index held at January’s seven-month high of 51.3.

Williamson said the survey was consistent with GDP growth of 0.2%, matching the projection in a Reuters poll published this week.

The headline index was buoyed by a rise in the PMI for the bloc’s dominant services industry to a forecast-beating 52.8 from 52.5.

With demand resilient, demonstrating some confidence, firms took on more workers, albeit at a slower rate than in January. The employment index dipped to 52.6 from 53.0.

While a manufacturing PMI held below the break-even mark, it continued its upwards march. It rose to 49.1 from 47.9, its highest level in a year and ahead of all forecasts in a Reuters poll.

An index measuring output, which feeds in to the composite PMI, rose to 48.4 from 48.0.

Most forward-looking indicators in the survey moved in the right direction, suggesting the manufacturing recovery was still on course and optimism remained elevated. The future output index only dipped to 57.9 from January’s 17-month high of 59.8.

“The expansion is being led by welcome resilience in the service sector but manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year,” Williamson said.

This article was originally posted on FX Empire

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