Why So Gloomy, Europe?

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What's going on?

Data released on Tuesday showed activity in the services sectors in parts of Europe and in the US rebounded higher than investors expected. But wait! Economists say the outlook for economic growth in the eurozone isn’t quite so peachy.

What does this mean?

According to the surveys – which interview senior managers and executives to measure activity levels of businesses in service sectors (think: anything that doesn’t involve manufacturing) – things were rosier in May than April. Activity in Spain overshot investor forecasts, helped by the second-highest month of job creation in more than a decade. The UK had its best month since February, and the US had a better-than-expected month, too – hot on the heels of Friday’s jobs report that was received well by investors.

However, business confidence in Italy sunk to its lowest level in almost two years – partly because of the recent political turmoil that’s spooked markets and businesses alike.

Why should I care?

For markets: European stocks are a little stuck.

It was largely a wash for European stocks on Tuesday. Investors weighing a potentially tougher business outlook in parts of Europe against strong survey data – plus a boost from the US tech sector feeding through to European tech stocks – ultimately left stock markets unchanged.

The bigger picture: Economic growth can be a bit wobbly.

Like a Hollywood romcom, investors often find reasons to go back and forth on whether economic growth, inflation and – as a result – interest rates are going up. While today’s data paints a mixed picture across Europe, there’s an upward trend – the US is leading the charge with rate rises (though investors are still debating whether they’ll be increased twice or thrice more this year), followed by the UK (since economic data’s likely to improve through the year, according to the Bank of England). Investors are probably hoping Europe follows suit heading into 2019.

Originally posted as part of the Finimize daily email.

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