Euro Zone Business Activity Takes Unexpected Sharp Turn

Business activity in the Euro zone unexpectedly contracted this month due to sharp downturns in the services and manufacturing sectors. The decline has led to a broader economic concern, with predictions of further ECB policy easing and a notable drop in the Euro against the Dollar.

Business activity within the Euro zone has contracted sharply and unexpectedly this month, according to a recent survey. The bloc's dominant services sector stagnated, while the manufacturing downturn accelerated, affecting key economies like Germany and France.

This unexpected contraction has fueled anticipations of additional policy easing by the European Central Bank (ECB), leading to the Euro plunging to its largest daily drop against the Dollar in over three months. The HCOB's preliminary composite Purchasing Managers' Index (PMI) sank to 48.9, dropping below the growth-contraction threshold for the first time since February.

Government bond yields across the Euro zone have tumbled on this data. Germany, faced with continued economic contraction, appears headed towards a technical recession. Meanwhile, easing price pressures amid rising inflation rates spark cautious optimism about further interest rate cuts by the ECB.

(With inputs from agencies.)