European factories bounce as Asia struggles, but Brexit poses threats

Fri Jul 1, 2016 6:04am EDT
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By Jonathan Cable and Wayne Cole

LONDON/SYDNEY (Reuters) - Factories across Europe enjoyed a buoyant month in June but that growth could be under threat after Britons voted to leave the European Union last week, surveys conducted almost entirely before the historic referendum showed.

Highlighting another worrying trend for the global economy, China's vast factory sector flatlined as exports shrank and jobs were cut, in a slowdown across Asia that could lead to yet more policy stimulus as doubts grow over the potency of measures taken so far.

The hard times signaled by a range of surveys was not what the world needed a week after Britain voted to leave the EU, condemning the bloc to months if not years of political and economic instability.

"The unimaginable has happened and the UK vote will cast a long shadow over the UK, Europe and global markets for some time to come," warned Westpac head currency strategist Robert Rennie.

"A structurally weaker pound, a softer euro and weaker global growth beckons."

Markit/CIPS reported a surprisingly strong reading of 52.1 in June for their UK Manufacturing Purchasing Managers' Index (PMI), up from May's 50.4. That was the strongest reading since January and better than all forecasts in a Reuters poll of economists, which produced a consensus view of 49.9.

But data company Markit warned "almost all" the data from manufacturers used in its survey were received before the June 23 referendum.

"Leaving the EU threatens the loss of 50 free trade agreements with other countries, as well as restricted access to the single market itself," said Samuel Tombs at Pantheon Macroeconomics.   Continued...

An employee works on an assembly line producing automobiles at a factory in Qingdao, Shandong Province, China, March 1, 2016.   REUTERS/Stringer/File Photo