Further poor news fails to rattle Europe’s markets

EUROPEAN stock markets shrugged off a slew of bleak eurozone economic data on Tuesday, although investors are braced for some jitters when London reopens today after the extended Jubilee holiday weekend.

The financial markets’ resilience came in the face of news that Markit’s composite output index for the single currency zone’s services and manufacturing activity sank to a 35-month low of 46 in May.

This compared with a level of 46.7 in April and 49.1 in March. A figure below 50 denotes contraction.

Separately, official data showed that eurozone retail sales slumped 1 per cent month-on-month in April. It was the sharpest fall since December and more than reversed the 0.3 per cent month-on-month gain seen in March.

Howard Archer, chief UK and European economist at forecasting group IHS Global Insight, called it “a dismal day for the eurozone”.

Archer said he doubted whether the European Central Bank (ECB) would cut interest rates at its policy meeting on Wednesday, but added that “we do now think it is highly likely that the ECB will cut interest rates” in the third quarter of 2012.

Despite the data, and continuing nerves about the latest G7 meeting on the eurozone’s problems, Germany’s Dax index closed down just under nine points at 5,969.40. France’s CAC-40 ended up 32 points, or 1.1 per cent, at 2,986, while Madrid’s Ibex closed 0.5 per cent ahead.

Wall Street was largely unchanged in morning trade, while the Nikkei average index in Japan finished up 1 per cent at 8,382.