European markets start Q2 strong

Stocks in Europe got off to a positive start for the second quarter of 2015 as data rolled in that suggests the eurozone’s economy is recovering, albeit gradually. However, the single currency edged lower against the dollar after posting its worst ever start to a year.

Germany’s DAX gained more than one per cent, the French CAC 40 surged around 1.4 per cent and the Euro Stoxx 50 soared almost 1.3 per cent.

Markit’s final March manufacturing Purchasing Managers’ Index (PMI) for the eurozone climbed to 52.2, its highest level in ten months, hinting that factories are beginning to benefit from the European Central Bank’s (ECB’s) loose monetary policy and bond-buying programme.

The index was boosted by growing demand for exports due to the decline in the single currency, which fell around 12 per cent since January. The depreciation in the euro has made exports cheaper and competing imports more expensive, meaning that domestic demand also saw a strong rise.

"March saw the sharpest increase in new export orders since April 2014. Companies reported that the weaker euro was the main factor driving new export orders higher," said Chris Williamson, Markit's chief economist.

Despite this, he adopted a cautious stance when looking forward: "This is still a fledgling recovery, however, and the overall rate of expansion remains only modest."

PMI data in Ireland and Spain saw the fastest rates of expansion, with figures of 56.8 and 54.3, respectively. Germany, Italy and the Netherlands also saw activity increase in March, however, PMI readings in France, Greece and Austria remained below the 50 level, indicating contraction rather than growth.

Over in the UK, Markit’s PMI data suggested that the manufacturing industry grew at its fastest rate in eight months, on a similar increase in export orders and strong domestic demand. The index rose to 54.4 in March and Markit also suggested that output in the UK’s manufacturing sector grew by 0.6 per cent in 2015’s first quarter, a strong rise from the previous quarter’s growth of 0.2 per cent.