Sagging German economy sends euro lower, global shares recover

Wed Oct 24, 2012 8:29am EDT
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By Richard Hubbard

LONDON (Reuters) - The euro hit a one-week low against the dollar on Wednesday after surprisingly weak data from regional powerhouse Germany, though an improving outlook for China supported shares and oil.

The Chinese data was also set to give Wall Street a modest lift when share trading begins after Tuesday's sharp falls. .N

But the dismal German data took its toll on the euro, which fell 0.4 percent to $1.2922, well below its peak of $1.3140 hit early last week.

Activity in Germany's manufacturing and service sectors declined for a sixth straight month in October as order books thinned, indicating Europe's largest economy had clearly stagnated in the second half of 2012.

A separate poll of 45 economists by the Munich-based Ifo think-tank added to the gloom by revealing that business sentiment in October fell below even the weakest of forecasts.

"In all, while recent actions by euro zone policymakers may have calmed the markets, the euro zone's economic problems remain firmly in place," said Ben May, European economist at Capital Economics.

October's Composite Purchasing Managers' Index (PMI) survey for the whole 17-nation euro zone bloc meanwhile confirmed that the recession was likely to deepen across the whole region as activity hit its lowest levels since June 2009.

The euro could gain support later in the session when European Central Bank president Mario Draghi faces questions from German lawmakers.   Continued...

A city trader monitors stock prices in London.