Investing.com — Europe’s stock markets took another dip on Friday after the round of final purchasing manager indices for the month confirmed what amounts to a sudden stop in the economy all across the continent.
Consultancy IHS Markit revised down its flash PMIs across the board, principally because the numbers from the services sector, which accounts for the bulk of activity in every eurozone economy including Germany, were so dismal.
In Italy, the services PMI fell to 17.4, from 52.1 in February. That’s the lowest number Markit has ever reported for any of its PMIs, ever – worse even than Greece at the depths of its recession in the last decade. The Italian numbers led to the FTSE MIB being the worst performer in the region, down 1.5%.
The overall eurozone services PMI fell to 26.4, from 52.6. The only consolation, noted Paul Donovan, UBS Global Wealth Management chief economist, is that the surveys may be distorted by the nature of responses.
“You have to be a pretty unusual person to fill in a survey in this situation, which may create a bias – we do not want the views of unusual people to be presented as the views of the majority,” Donovan said.
The numbers “are now so far out of any reasonable range that they are difficult to interpret,” said Claus Vistesen, eurozone economist with Pantheon Macroeconomics. Vistesen’s base case is that eurozone GDP fell 4% in the first quarter and will shrink a further 10% in the current quarter, “based on the notion that activity will be at a hold in April and most of May.”
The Stoxx 600 Banks index, a (very) rough proxy for the service sector, fell 1.4%, as BNP Paribas (PA:BNPP) and Banco Santander (MC:SAN) fell into line with other big institutions in suspending their dividends.
Regulators in Frankfurt and London are desperate to ensure that the continent’s banks avoid asking for fresh bailouts, aware of the political difficulties that would create. However, given the surge in bad loans that seems inevitable against a backdrop of such awful macro numbers, the risk of such action (and the further dilution of existing shareholders) is already being priced in.