Euro zone in decline, U.S. and China gain

Tue Jun 5, 2012 11:20am EDT
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By Andy Bruce and Jonathan Spicer

LONDON/NEW YORK (Reuters) - All of the euro zone's major economies are now in various states of decline, according to business surveys that heaped more pressure on Europe's leaders to stop the region becoming the center of a new global crisis.

The latest purchasing managers indexes (PMIs), published on Tuesday, underlined why finance chiefs from the Group of Seven leading industrialized powers held emergency talks on the euro zone's debt crisis.

They agreed to work together to address pressing problems in Spain and Greece, Japan's Finance Minister Jun Azumi said.

The euro private sector economy shrank in May at the fastest pace in nearly three years, according to the PMIs, which suggested even Germany is no longer immune to the tremors emanating from the debts of Greece and Spain.

But the vast U.S. services sector grew at a slightly faster pace last month as a gauge of new orders improved, and China's fledgling services sector expanded at the fastest pace for 19 months.

The U.S. "data held up but is still at a low level and I do not think this counters the significantly weak data we have been seeing," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

U.S. stocks edged higher immediately after the data before trimming gains, while Treasuries prices increased losses and the dollar gained against the yen.

But the euro zone set an overwhelmingly dismal tone for the PMIs, which gauge how thousands of businesses across the world fare each month.   Continued...