European stocks fell Thursday after disappointing economic data reignited fears about the recovery in the 16 countries that use the euro.
The euro itself also fell as investors booked profits after a bigger-than-expected decline in the monthly purchasing managers index, or P.M.I. — a closely watched gauge of business activity.
In London, the FTSE 100 index was down 45.96 points, or 0.83 percent, while the DAX in Frankfurt fell 48.24 points, or 0.78 percent. The CAC-40 in France was 43.09 points, or 1.15 percent, lower.
European markets had started off fairly brightly after closing lower Wednesday amid unease over the pace of the economic recovery in the United States after the Federal Reserve’s latest policy statement.
However, concerns about Europe’s recovery took center stage after the overall purchasing managers index, which combines manufacturing and services, fell to 53.8 in September from 56.2 in August. The consensus in the markets was for a far more modest decline to 55.7.
Though the euro zone economy is growing the figures provide evidence that growth has faltered following the surprise spring surge — a reading above 50 indicates growth but the smaller the difference from 50 the lower the growth.
Particularly worrying is that the figures showed that growth in Germany, Europe’s economic powerhouse, has moderated far more rapidly than anticipated — Germany was the main driver behind the 1 percent quarterly growth posted in the euro zone in the second quarter.
“The export-driven uptick seen in the first part of the year is coming to an abrupt halt, as the slowdown in economic activity seen outside the euro zone during the summer has started to affect the single currency area,” said Marie Diron, chief economic adviser to Ernst & Young.
“Euro zone G.D.P. is set to continue to expand during the rest of the year but at a markedly slower pace than in the first half,” she added.
The figures took their toll on the euro too, which was trading 0.5 percent lower at $1.3333.
The euro had previously risen as much as 3 cents after the Fed said Tuesday it was “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with its mandate.”
After that statement, the markets are anticipating that the Fed will turn on the taps once again at its next rate-setting meeting in early November, and that the fresh supply of dollars could lead to further weakness in the currency despite the slowdown in economic growth implicit within Thursday’s figures.
The dollar’s decline Wednesday was not just confined to the euro though. It fell to a low of 84.28 yen, meaning that it has gone a long way to undoing the effects of last week’s unilateral intervention by Japanese authorities in the markets to stem the export-sapping appreciation of the yen.
Even though the dollar advanced modestly to 84.50 yen Thursday, traders remain on the lookout for another intervention from the Japanese monetary authorities — precedent suggests that the Bank of Japan will be back in the markets buying dollars and selling yen.
Wall Street was poised for further losses at the open following Wednesday’s modest retreat. The main point of interest later will be weekly jobless claims and traders will be looking to see if the recent improving picture is sustained.
