European markets are on the back foot this morning after investors were disappointed by the size of a monetary stimulus plan from the US Federal Reserve and data from China and Europe pointed to a continued slowdown in the two manufacturing economies.
Fed Chairman Ben Bernanke said last night that he plans to extend the current “Operation Twist” until the end of the year, using $267bn in maturing bonds on the Fed’s balance sheet to purchase new assets and boost economic growth and hiring. The Fed also cut its growth forecast for the world’s biggest economy to between 1.9 percent and 2.4 percent for this year.
Here in Europe, manufacturing data for the Eurozone was marked at its weakest level since March of 2009 and followed on the heels of a the eighth consecutive contraction in China’s manufacturing sector, as reported in a private survey run by HSBC earlier today. The figures added to the pressure already applied to European shares thanks to an impending announcement from Spain later today regard the size and scope of the EU rescue funds it will need to shore up its banking sector.
Elsewhere, UK retail sales improved marginally in May, according to the Office for National Statistics, growing 1.4 precent from April and 2.4 percent for the year – both better than analysts’ estimates.