Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: sciAticA errAticA who wrote (32902)	5/2/2003 7:33:01 AM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

European Manufacturing Shrank in April as Euro Economy Stuggles to Grow By Jeffrey T. Lewis Madrid, May 2 (Bloomberg) -- European manufacturing shrank in April for the seventh time in eight months as production, orders and exports fell, suggesting the euro region's economy may contract for a second quarter. An index based on a survey of purchasing managers at about 2,500 euro region companies for Reuters Group Plc fell to 47.8 from 48.4 in March. Economists had predicted an increase to 49. ``Today's figures increase the chance of recession,'' said Joerg Kraemer, chief economist in Frankfurt at Invesco Asset Management, which oversees $178 billion. ``Production will at best stagnate in coming months.'' The $7 trillion economy probably contracted in the first quarter and will barely grow in the second, the European Union estimates. The currency's 6.5 percent gain against the dollar this year is eroding demand for European exports. At the same time, rising unemployment is discouraging consumer spending. German retail sales fell in March. Thomson SA, the world's fourth-largest consumer-electronics maker, attributed a 24 percent decline in first-quarter sales on lower demand in the U.S. and the dollar's decline, the Paris-based company said on April 16. ``Exports struggle when the euro is this strong,'' said Lionel Oster, who helps manage the equivalent of $56 billion at F&C Management Ltd. in London. Thirteen of the 17 western European benchmark indexes fell today. Germany's DAX Index shed 1.1 percent, and France's CAC 40 Index lost 1.2 percent. Faltering Recovery Concerns are mounting about an economic rebound in the U.S. where factory output contracted in April for a second month, an industry report yesterday showed. Federal Reserve Chairman Alan Greenspan said this week he's confident the U.S. economy will grow at a faster pace, ``though the timing and the extent of the improvement remains to be seen.'' Today's index for Germany dropped to 45.9 from 47.8 in March. German factory output declined, a further sign of slowing growth in Europe's biggest economy. Chancellor Gerhard Schroeder cut his growth forecast to 0.75 percent this year. Siemens AG, Germany's largest engineering company, said last week it may extend cost cuts as a slowing economy prompts customers to reduce spending. Fiscal second-quarter profit fell 56 percent, and the company is shedding more than 35,000 jobs. French business confidence declined to a 15-month low in April as export orders fell. France's economy contracted 0.1 percent in the fourth-quarter, a separate report showed, revising down the 0.2 percent growth originally reported for Europe's third- largest economy. European Central Bank ``I feel much less confident about the general economic growth outlook,'' Jyrky Juusela, chief executive officer at Outokumpu Oyj, the fourth-biggest maker of stainless steel, said last week. ``Nobody knows what will happen after the summer.'' Stalling growth may push the European Central Bank to cut interest rates again for the 12 countries sharing the euro, investors said. The bank in March reduced its benchmark lending rate a quarter point to 2.5 percent, the lowest in 3 1/2 years. `` There's more pressure from everywhere,'' said Luigi Buttiglione, head of European economics at Barclays Capital Plc in London and a former economist at Italy's central bank. ``Europe is on a well-established downward trend.'' He expects the ECB to cut rates in June. Interest-rate futures contracts suggest investors are betting on another reduction. The yield on a three-month euro deposit maturing in June was at 2.34 percent at 10:04 a.m. in London, compared with a money market rate of 2.53 percent. `Less Than It Could' ``The economy is growing much less than it could, and inflation should start to come down'' as oil prices drop, said Rajeev Demello, who manages the equivalent of $5.6 billion in euro region fixed-income bonds at Pictet & Cie in Geneva. Demello expects the ECB to cut its rate to 2.25 percent after May. The inflation rate in the euro countries dropped to 2.1 percent last month from 2.4 percent in March, according to the European statistics office's preliminary estimate. Concern about the war in Iraq pushed up the price of oil in the first two months of this year as high as almost $40 a barrel. The price of a barrel of crude oil has fallen more than 10 percent since the beginning of March. Brent crude oil futures were trading at $24.18 a barrel today. Postwar Outlook The purchasing managers' surveys were all conducted after U.S.-led forces captured Baghdad on April 9, NTC Research said. Analysts said the effect of the fall of Baghdad on a recovery in investment probably won't show up until the survey for May. ``The surveys ask about output and orders and such, and those things probably didn't change much just because of the fall of Baghdad,'' said Michael Hume, an economist at Lehman Brothers Holdings Inc in London. The outbreak of severe acute respiratory syndrome, or SARS, is slowing economic growth in China and other parts of Asia and also affecting business in Europe. The illness has caused more than 350 deaths around the world, according to the World Health Organization. Airbus SAS, the world's second-largest maker of aircraft, may fail to meet its goal of delivering 300 planes this year because the onset of SARS is causing Asian carriers to push back orders, Chief Executive Officer Noel Forgeard said last week. Last Updated: May 2, 2003 06:23 EDT bloomberg.com