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European services widen contraction in Feb. yet beats initial estimates, euro rises
While manufacturing sector`s contraction lingered at 47.9, services deteriorated to 47.9 from 48.6 in Jan., yet came better than initial estimates of 47.3, where the composite index fell down further to 47.9 from 48.6.
After the confidence which was regained after the latest decisions made by European officials last year to ease the three-year-old debt crisis, worries were renewed after a report released last week showed a worse than expected contraction in the euro area in the last three months of 2012 and after Italy`s Parliamentary elections showed inconclusive results.
Eurozone recorded a contraction of 0.6% in the fourth quarter from 0.1% contraction in the previous three months, underpinned by the contraction in the region`s biggest economies.
ECB President Mario Draghi said in January the worst of the debt crisis may be over, stating the “darkest clouds” have lifted, but he played down his confidence tone last month by mentioning that growth risks remains to the downside, referring that the data signals a continuation to the weak growth pace in the last three months of 2012 and the first quarter of 2013.
The European Commission said last month it expects 0.3% contraction in the 17-nation region this year.
Italian elections, on the other hand, reached a deadlock situation as no party managed to get an absolute majority, thereby there may elections as early as June as if Grillo refused the last offer by Bersani to form a coalition government together.
By the same token, euro area finance minister did not settle the issue of bailing out the small European island, Cyprus, postponing the decision till late March.
In Germany, the manufacturing gauge showed an expansion of 50.3 last month from a contraction of 49.8 in Jan., whereas services recorded a narrowing expansion to 54.7 from the prior of 55.7.
As of 09:10 GMT, the euro resumed its rebound for a second day to 1.3070 after hitting three-month low of 1.2965 last week.
On Thursday, eyes will track the ECB`s monetary decision where the bank is predicted to hold its monetary stance this month, probably waiting for the latest developments in the euro area as it already expects a contraction in the first three- month of this year, noting that Draghi said last week the ECB has no intention to withdraw stimulus any soon.