Once you look at the headlines you find it's bad news, especially for the German economy. It sees Europe's backbone, with the biggest decline in business activity since May 2020, and that does not bode well for the region, especially with services activity now sharply declining alongside the manufacturing sector, as German PMI data as it boosts recession risk in Europe's largest economy and what makes things worse for the ECB are underlying price pressures that remain relatively high as they will be passed on to consumers.
Bond yields also fell as ECB bets on rate hikes fell after PMI data, as odds of a 25 basis point rate hike fell next month to nearly 51% from around 65% ahead of data.
German 10-year bond yields have now fallen more than 10 basis points on the day to 2.55%, triggering a broader dip on yields across the market. Yields on the 10-year Treasury also fell 6 basis points to 4.268% currently.
So we have deteriorating economic developments across the region, coupled with a credit crisis and very stubborn inflation. ECB certainly has a tough job until next September
Can we say the region is on the verge of an inflationary recession?
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