THE TAKEAWAY: Euro-zone Composite Output reported at 46.5, slightly improved -> Negative output for 10th consecutive month -> Euro trading steady

Euro-zone composite output dropped for the 10th consecutive month according to final estimate of Markit’s Purchasing Managers’ Index. The index of composite output was reported at 46.5 in November, rising from a previous estimate of 45.8, and higher than October’s 45.7 composite output, which was a 40-month low. The PMI for services rose to 46.7 in the final estimate from a previously estimated 45.7, it was also higher than October’s 46.0 services index. Any PMI below 50.0 indicates a contraction in sector activity.

Ireland was the only Euro-zone country to see a rise in business activity according to the PMI; the rate of expansion barely changed from October’s 20-month high. The rates of decline eased a bit in France, Spain, and Germany.

The level of new business in Euro-zone services and manufacturing contracted for the 16th month in a row in November. Employment fell for the eleventh straight month according to the PMI.

The Euro-zone hit a technical recession when its GDP declined for the previous two quarters, and Euro investors are looking for a sign that the economy will return to growth in Q4. The PMI’s do not suggest economic expansion in Q4, but not all signs were bad according to Markit. Chief Economist Chris Williamson said, ‘There are signs that the recession may have reached a nadir, however, at least in terms of the rate of decline, and it is reassuring to see that the final Eurozone PMI reading came in higher than the earlier flash estimate.’

The Euro seemed unaffected by the improved PMI’s, and trading in forex markets remained steady. EURUSD continued yesterday’s rally in today’s session despite the meeting of finance ministers failing to reach a final agreement on the banking supervisor. The pair is currently trading above 1.3100, and resistance could be provided by a 2-month high at 1.3139. Support could be provided at 1.3026, by the 76.4% retracement of the drop from October’s high to November’s low.

EURUSD Daily: December 5, 2012

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