Eurozone’s recovery efforts hit hard by second wave amid warning of another downturn

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The huge hurdle on the road to recovery will spark concern among policymakers who had hoped the bloc’s economy was healing following its historic 11.8 percent contraction in the second quarter. To get things moving again, the European Central Bank (ECB) plans to make €1.35 trillion of pandemic-related additional asset purchases.

The European Union has also announced a €750 billion recovery fund which is due to kick in next year.

But despite the huge sums of money put forward, it didn’t stop IHS Markit’s final composite Purchasing Managers’ Index (PMI), falling to 50.4 in September from August’s 51.9.

The PMI is seen as a good barometer of economic health.

Last month’s drop saw it come dangerously close to the 50-mark separating growth from contraction.

It was dragged down by the PMI for services industries, which accounts for around two-thirds of GDP.

The industries slumped to 48.0 from August’s 50.5, albeit slightly better than a preliminary 47.6 estimate.

Chris Williamson, chief business economist at IHS Markit, offered a gloomy outlook for the final quarter of 2020.

He warned: “With the eurozone economy having almost stalled in September, the chances of a renewed downturn in the fourth quarter have clearly risen.

“Much will depend on whether second waves of virus infections can be controlled, and whether social distancing restrictions can therefore be loosened to allow service sector activity to pick up again.”

In a clear sign any pick up may take some time, demand for services fell in September and firms cut headcount for a seventh month.

The new business index fell to 48.1 from 49.8.

Still, optimism about the coming year improved to levels not seen since before Europe felt the full brunt of the pandemic.

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The composite future output index rose to 60.5 from 57.8 – its highest since February.

On Monday a series of positive updates regarding US President Donald Trump’s health and a flurry of dealmaking activity helped European shares close at a two-week high.

The pan-European STOXX 600 index rose 0.81 percent.

And MSCI’s gauge of stocks across the globe gained 1.64 percent.

The dollar index fell 0.4 percent, with the euro up 0.58 percent to $1.1784.

Meanwhile crude prices surged on waning uncertainties, with US crude futures settled at $39.22 per barrel, a 5.86 percent gain.

Brent crude advanced 5.14 percent to settle at $41.29 per barrel.

The surges were further supported by an ongoing strike by oil workers in Norway.

Six offshore oil and gas fields in the Scandinavian country have been shut down.

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