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 A crop of industry surveys out on Monday pointed to October as
another subdued month. Activity in China's colossal factory sector
shrank as global demand stuttered while euro zone factories again
resorted to slashing prices to drum up trade.
"We do think there is more easing to come in China. They are in the
midst of a long-running easing cycle that is probably going to go on
until late next year," said Andrew Kenningham at Capital Economics.
"The ECB is likely to announce something further in December. The
concerns there are not so much about growth but about the prospects
for inflation."
More than half a year after the ECB started pumping in 60 billion
euros a month of new money through its quantitative easing program,
the currency bloc's relatively downbeat manufacturing survey may
make disappointing reading for policymakers.
 The central bank has failed to lift inflation anywhere near its
target of just below 2 percent, and data on Friday showed prices
were unchanged last month, heaping more pressure on the bank to act.
It was already almost certain the ECB would ease monetary policy in
December, increasing or extending its stimulus program and further
cutting the deposit rate, a Reuters poll of economists taken ahead
of the inflation data found. [ECB/INT]
Beijing has also rolled out a raft of support steps to avert a
sharper slowdown, including cutting interest rates six times in the
past year, but the stimulus has been slower to take effect than in
the past.
The pedestrian surveys will focus attention on the U.S. Institute
for Supply Management (ISM) measure of manufacturing due later
Monday which is forecast to have flatlined in October.
Having taken a rain check on a long-speculated rate rise in
September, the Federal Reserve last month surprised markets by
downplaying global growth worries while opening the door wide to a
hike in December.
"One of the reasons they didn't move in September was concerns about
the state of the global economy and particularly China. Our view is
that most likely they will wait until next year but they may decide
to move in December," Capital Economics' Kenningham said.
Stocks fell in Europe and Asia on Monday after the further evidence
of economic slowdown in China. [MKTS/GLOB]
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LITTLE CHEER
Markit's final euro zone manufacturing Purchasing Managers' Index
was 52.3 last month, only slightly up from the September and
preliminary October reading of 52.0. It has, however, been above the
50 mark that separates growth from contraction for over two years.
There was only modest growth in Germany, Europe's largest economy,
though Italy stood out with activity increasing for the ninth
straight month and at its fastest pace since July,
In China, manufacturing industry unexpectedly contracted for a third
straight month, according to the official survey out on Sunday, just
missing market hopes for a break-even 50.0 reading, while new export
orders shrank again.
Monday's Caixin/Markit China PMI, which focuses on small and
mid-sized companies, rose. But at 48.3 in October, it still pointed
to an eighth month of contraction.
"Overall, the flat PMI suggests the still-weak underlying growth
momentum in Q4 and we continue to look for more signs of near-term
growth stabilization," said Jian Chang at Barclays.
The only promising news came from Japan and Britain.
The Markit/Nikkei PMI hit its highest in a year at 52.4, yet its
economy remains at risk of recession and markets are betting the
Bank of Japan will have to expand its asset-buying campaign.
In Britain, which doesn't use the euro, factory activity
unexpectedly surged to a 16-month high helped by a recovery in
export orders although economists remained cautious.
"We hesitate to conclude from October's Markit/CIPS manufacturing
survey that the sector's recession is over," said Samuel Tombs at
Pantheon Macroeconomics.
"In one line: take with a pinch of salt."
(Editing by John Stonestreet)
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