European shares traded close to flat on Thursday as upbeat surveys on Germany and the euro zone offset signs that the United States policymakers had not intended to start a cycle of interest rate cuts.
Germany’s DAX .GDAXI traded 0.1% higher, after Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors, rose to 51.4 in August 2019 above expectations of 50.5.
The leading indicator also showed French business activity expanded in August, pointing to resilience in the euro zone’s two biggest economies after Germany contracted in the second quarter.
A similar survey showed Euro zone business growth picked up a touch in August, helped by brisk services activity and as manufacturing contracted at a slower pace.
The data helped the pan-European STOXX 600 index to recover from solid initial losses to trade just 0.1% lower by 0815 GMT, with Italian stocks FTMIB outperforming with a 0.39% rise.
“What we are seeing is the service sector holding up comfortably well while the industrial slump has got more room to run and even possibly deepen
“This data is not going make recessionary concerns worse, but it also won’t make them vanish anytime soon. We are still far away from any stabilization and it could possibly drag on till we see at least a partial trade deal between the U.S. and China,” said Holger Schmieding Chief Economist at Berenberg.
Meanwhile, Italy reversed earlier losses after Reuters reported President Sergio Mattarella wanted clear signs of a possible deal to form a new government by the end of the day.
“That is actually good news because the immediate challenge for Italy is to come up with a 2020 budget by mid-October, now the 5-Star and Democratic Party (PD) could possibly broker a compromise with the EU which would reduce uncertainty,” Schmieding said.
Hopes of stimulus moves by governments and central banks have steadied major stock markets in the past week but most are still on course to end August lower after a two-week sell-off driven by concerns that major economies were heading for recession.