London/Beijing: Chinese manufacturing slumped for a fifth month in March and the Eurozone economy is showing new signs of wilting, according to surveys yesterday that pointed to weakening global demand.
Only the United States is showing signs of momentum among the world's top economies, underlined by data showing jobless claims fell to a fresh four-year low last week.
That was reinforced at mid-morning by a report from the New York-based Conference Board showing its leading economic index climbed 0.7 per cent during February. It was a fifth straight monthly rise, the best string of gains since the US economy was coming out of recession in 2009.
Still, investors were unnerved by the reports from Asia and Europe, selling riskier assets such as stocks.
Yesterday's batch of purchasing managers indexes suggested China and Europe will not contribute to a global upturn any time soon. Factory activity in China shrank for a fifth straight month in March, hit by declining order books, disappointing exports and new hiring hitting a two-year low.
Job market
By contrast, yesterday brought more evidence the US jobs market is improving, with initial jobless claims falling by 5,000 to 348,000 last week — the smallest number since February 2008 and in contrast to expectations for a rise.
"The PMIs give a warning that even if the US economy seems to be doing quite well, that doesn't necessarily translate to solid growth in every other part of the world," said Jonathan Loynes, economist at Capital Economics in London.
China's slowdown partly reflects the weakness of economies in Europe, its single biggest export partner. The PMIs suggested a Eurozone recession is now unavoidable.
German and French manufacturing, which this time last year spearheaded the Eurozone's recovery, suffered a sharp decline this March that even the most pessimistic economists failed to predict.
Investors immediately hedged exposure to trades betting on a rebound in global growth. Brent crude oil pared losses to 0.3 per cent after the US jobs data before falling again, to be down 1.3 per cent to $122.58 a barrel.
Worst of the sovereign debt crisis is over
European Central Bank President Mario Draghi said the worst of the sovereign debt crisis is over, Germany's Bild newspaper reported, citing an interview.
"The worst is over, but there are still risks," Draghi was quoted as saying. "The situation has stabilised. The important indicators for the Eurozone, like inflation, current account and above all the budget deficits, are better than, for example, in the United States."
Investor confidence has returned and "the ball is now with governments," Draghi said, according to Bild. "They must sustainably secure the Eurozone against crises."
Draghi also said Germany is a "role model" in Europe, and the ECB's 23-member Governing Council, which contains two Germans, has "internalised" Germany's stability culture, Bild reported. Draghi shares Bundesbank President Jens Weidmann's concerns about the risks the ECB has taken and there is no north-south divide on the council, the newspaper said.
If the inflation outlook worsens, the ECB "will immediately act pre-emptively," Draghi said, according to Bild. However, if oil and tax increases are taken into account, inflation remains stable at around 1.5 per cent, he said. The ECB's lending to banks won't fuel inflation, Draghi was quoted as saying.