August 24, 2021

This Is Why Investors Don't Give Much Reaction Even Though European Zone Business Is High!

 European zone business activity reportedly jumped higher this month but declined from the July reading. This positive reading was driven by an extensive vaccination program that allowed more companies to reopen and customers to venture out.

Without continued supply chain disruptions, activity could grow faster despite concerns Delta variants could constrain economic returns.

The IHS Managers' Purchasing Index, which is an indication to assess the health of the economy, was reported to have fallen to 59.5 in August from a reading of 60.2 last month.

According to analyst Bert Colijn at ING. ”The reopening of the economy has had a positive impact on economic growth. At the same time, concerns over the effects of delta variance and lack of input remain but have not thwarted the economic recovery. ”

Both the services and manufacturing indices remain strong in the growth region of Germany, confirming Europe’s largest economy is still on the right track.

Market players did not give much reaction and instead focused on concerns of the Delta Covid-19 variant that could potentially hinder economic growth as investors over-considered the timeframe that would likely lead to a reduction in monetary stimulus.

The Purchasing Managers Index (PMI), which covers the services industry, rose to 59.7% in August. Demand only showed slightly slower growth from July.

The Euro continued to strengthen against the US dollar by 0.35% to the trading level of 1.1736.