Europe's Manufacturing Sector Activities Mostly Unchanged During August

European economies released performance activities for the manufacturing sector over the past month, showing that conditions remained mostly unchanged, while UK's manufacturing sector witnessed a drop in activities that exceeded expectations.

The final Euro-Zone PMI Manufacturing index for the month of August inched higher to 55.1, compared with the previous and the expected 55.0. The drop in demand and falling exports that reached the lowest in nearly seven-months will signal to investors that the upcoming quarter might signal more easing conditions and slowdown in economic activities.

In Germany, the same report signaled that conditions in the manufacturing sector remained unchanged at 58.2, which was expected by markets. Europe's economy managed to expand at the fastest pace since 2006, while Germany, which contributes in nearly 20% of EU total GDP, expanded at the fastest pace in two-decades, but both expansion and improvement in conditions in the second quarter of this year were supported by the competitive drop of the European common currency that helped boost exports and support growth in the continent.

Nevertheless, a reading above 50 is considered an expansion, but cooling conditions in UK might trigger investors safe haven demand throughout today, causing equity markets to extend the losses that were witnessed yesterday, along with a general rise in low yielding assets, gold as safe investment among treasuries.

UK's PMI manufacturing index dropped to 54.3, compared with the previous 57.3 which was revised to 56.9. Analysts expected the index to dip to 57.0.

Easing conditions in the US and Asian markets will offset and trim most of the progress that was witnessed throughout the second quarter of this year, where the decline in economic activity and weak demand was obvious on Germany's retail sales that dropped in the month of July by 0.3 percent, compared with the previous -0.9% that was revised to -0.3%; median estimate projected a 0.5 percent rise. Moreover, on the year, the index rose by 0.8%, below the previous 3.1 percent that was revised to 4.7 percent, and the expected 1.2 percent.

Rising value of the euro over the past period hammered exports in Europe and might force the economic growth to slowdown over the third and fourth quarter of this year, where the British economy grew by 1.1 percent during the second quarter of this year, its best performance in nearly four-years, at the meantime, concerns about sustaining growth in the country might rise where the governments seek to reduce spending and slash its budget deficit that would alter the recovery over the upcoming period.

ECB projections for this year's growth rate to near 1.0 percent, and to continue expanding throughout the upcoming year by 1.2 percent. The BoE expect the economy to grow by 1.0 percent during the current year, while extending its growth rate by 1.2 percent in 2011. But the debt crisis in the region, budget cuts, elevated unemployment, tight credit conditions, outlook uncertainty, and weak economic conditions accompanied with low demand levels will affect consumer's spending patterns and force the economy to witness low growth levels, and an actual return to contraction.

The euro rose against the dollar ahead of US session; where the pair is currently trading at 1.2709, recording the highest at 1.2765 and the lowest at 1.2661, technically, projections suggest that the pair will decline over intraday basis targeting 1.2570.

Meanwhile, the GBP traded unchanged against the dollar at 1.5345, where the pair managed to reach the highest at 1.5417. The dollar depreciated against the yen after setting a high of 84.57 to drop to a low of 83.92, while currently the pair is trading at 84.10. Gold rose to trade at 1250.75, while oil for October delivery rose to trade at 72.21.

So far, traders sent Europe's equities to trade higher. As of 4:43 EST, FTSE 100 index gained 28.04 points, appreciating by 0.54% to last trade at 5253.26, while the CAC 40 index ascended by 0.31 percent to last trade at 3501.67, the DAX index slashed 0.25% to last trade at 5910.46.