Mounting uncertainty over health of eurozone

Europe’s economic outlook has been thrown into fresh doubt after reports showed weakness across France and Germany. Hopes that the slowdown had reached a trough have taken a beating from renewed weakness in France and the deepest slump in German manufacturing in over six years. A eurozone Purchasing Managers Index is signalling growth of 0.2% this quarter, matching the pace of the previous three months.

The news reverberated through markets, sending Germany’s 10-year bond yield below 0% for the first time since 2016. Yields on Spanish, French, and Italian debt also declined, while the euro dropped 0.6%. Much of the source of the economic weakness appears to be external, with export orders, particularly in manufacturing, under pressure. Trade tensions, tariffs, and weaker global growth are all taking a toll, with Germany feeling much of the pain. Japan, another export-heavy economy, also reported a contraction in activity in its manufacturing sector.