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 Speculation Athens would fail to make June 30's 1.6 billion euro
repayment to the International Monetary Fund, heightening
expectations Greece would crash out of the currency union, kept the
bloc's manufacturing output check.
Having now defaulted on that debt and lost frozen international
bailout money, Greek Prime Minister Alexis Tsipras wrote to
creditors saying he was ready to accept their offer but only with
revisions, according to a Greek government official.
A Reuters poll on Monday said there was a 45 percent chance that
Greece would leave the euro and, although it makes up only about 2
percent of the euro zone economy, fears of contagion to other weak
members overshadowed recent signs that businesses are in better
shape.
Markit's final euro zone manufacturing Purchasing Managers' Index (PMI)
reached a 14-month high but only nudged up 52.5 last month, from
May's 52.2. That was in line with a preliminary reading published
before the Greek fears intensified.
Any reading above 50 indicates growth. A sub index measuring factory
output that feeds into the composite PMI, due on Friday and seen as
a good guide to growth, came in at 53.6, just above May's 53.3.
That PMI outstripped lackluster readings from Germany and France,
the euro zone's two biggest economies, for a second month and Markit
said manufacturing provided only a modest boost to the wider
economy.
"It is still only consistent with fairly sluggish growth in euro
zone industrial output, suggesting the beneficial effects of the
euro's depreciation may already be starting to fade," said Jessica
Hinds, European economists at Capital Economics.
"The country breakdown revealed that industry is still faring well
in Spain and Italy, but with worries about Greece intensifying this
may not be sustained."
British manufacturing growth slowed unexpectedly to its weakest rate
in more than two years, dented by subdued export demand from Europe.
[GB/PMIM]
European shares and peripheral euro zone bonds rose and the euro
held its own earlier on Wednesday as some investors kept faith with
expectations that, despite defaulting, Greece would find a way to
stay inside the currency zone.
Later on Wednesday in the United States, the ISM factory PMI is
expected to accelerate, reinforcing views the Federal Reserve could
start raising interest rates in September.
ASIAN TIGERS PURRING
Growth in China's services sector picked up in June while big
Japanese companies planned to ramp up spending at the fastest pace
in a decade, offering hope that prospects are improving for Asia's
largest economies, despite sluggish factory growth.
Activity in China's factory sector expanded slightly in June though
not as much as expected, official surveys showed, suggesting the
economy may be starting to slowly level out after a raft of support
measures.
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China's official manufacturing PMI for June came in at 50.2,
unchanged from May, while the services PMI climbed to 53.8 from
53.2.
Japanese factory business barely expanded but a private report
showed a strong pick-up in export orders, while a Bank of Japan
survey showed a strong bounce in business confidence and spending
plans.
That will be a welcome sign for Prime Minister Shinzo Abe's economic
revival strategy which has had limited success in nudging firms to
boost wages and investment.
"When you have two of the biggest economies in the world showing
positive readings, that is encouraging. They also come on the back
of some good readings out of the U.S.," said Craig James, chief
economist at CommSec in Sydney.
Analysts at ANZ, though, suspect softness in the manufacturing
sector would require more policy easing.
"Looking ahead, as real interest rates faced by Chinese companies
remain elevated, we see that further monetary easing is still highly
needed," said Liu Li-Gang and Zhou Hao at ANZ.
On Saturday, China's central bank cut lending rates for the fourth
time since November and trimmed the amount of cash some banks must
hold as reserves. The action was the first since the height of the
global financial crisis in late 2008.
In South Korea, exports fell and factory activity shrank. An
outbreak of the deadly Middle East Respiratory Syndrome has prompted
some analysts to trim economic growth forecasts and pushed the
government to announce a $13 billion fiscal stimulus package.
Reports from India, Taiwan and Indonesia also pointed to challenging
conditions for many economies in the region.
(Additional reporting by Kevin Yao in BEIJING, Leika Kihara and
Tetsushi Kajimoto in TOKYO, Christine Kim in SEOUL; Editing by Jon
Boyle)
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