By Jonathan Cable and Leika Kihara
LONDON/TOKYO (Reuters) - The bitter trade war between China and the United States kept global factory activity largely in decline in August, business surveys showed, strengthening the case for policymakers to unleash fresh stimulus to fend off recession risks.
In a fresh escalation of the trade spat, the United States began imposing 15% tariffs on a variety of Chinese goods on Sunday. China reciprocated with new duties on U.S. crude oil, increasing fears of a global economic slowdown.
An ongoing decline in the euro zone's export-reliant powerhouse of Germany meant factory activity in the bloc contracted for a seventh month in August, bolstering expectations the European Central Bank will ease monetary policy next week.
IHS Markit's August final manufacturing Purchasing Managers' Index (PMI) was 47.0, matching an earlier flash reading but well below the 50 level separating growth from contraction.
While an improvement on July, that month's reading was the euro zone's lowest since December 2012.
In one brighter spot, as it is less dependent on exports than other euro zone countries, France's economy has so far proved more impervious to a slowdown and factory activity returned to growth as manufacturers saw output and client demand pick up.
Manufacturing in Britain, rocked by the deepening Brexit crisis and global downturn, contracted last month at the fastest rate in seven years.
"The big picture is that manufacturing is on track to contract for a second consecutive quarter, and a meaningful recovery is unlikely given the ongoing struggles of global manufacturing," said Andrew Wishart, an economist at Capital Economics.
"And while the euro zone equivalent ticked up, it points to manufacturing output from the bloc continuing to contract."
A similar survey due later from the United States is expected to show slowing manufacturing growth in the world's largest economy. (reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=USPMI%3DECI poll data)
But in a surprise development, China's factory activity expanded as output edged up, a private sector PMI showed, although orders remained weak and business confidence faltered.
Following Monday's data, market sentiment remained fragile and while European stocks rose cautiously, driven by a rally in miners, the euro was 0.05% lower at $1.0985 <EUR=>, not far from a two-year low of $1.0963 hit in U.S. trade on Friday.
ASIAN STRAIN
Export-reliant South Korea, Japan and Taiwan saw factory activity shrink, underscoring the growing pain from the tit-for-tat tariff war between the world's two-largest economies.