Markets drop sharply as fears of global slowdown intensify

Financial markets around the world have dropped sharply amid mounting fears of a slowdown in the global economy, after eurozone factory output fell at the fastest rate in almost six years.

Friday’s losses on stock exchanges across Europe and on Wall Street came after figures suggested economic growth across the European single currency bloc remained weak in the first quarter of 2019, dashing hopes of a rebound from a weak end to last year.

Economists said the poor readings of industrial output probably reflected a slowdown in China and the world economy, raising the prospect that growth for the rest of 2019 would be weaker than expected.

New York slumped, with the Dow Jones industrial average falling by more than 300 points, while the FTSE 100 dropped by 2% and markets across Europe also recorded steep losses.

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The IHS Markit flash purchasing managers’ index for factory output in the euro area, which is used to identify early warning signs of economic stress, showed that output in March contracted the most since December 2012 – a period when the eurozone was gripped by the sovereign debt crisis.

Analysts said disruption to businesses from Brexit was having an impact, but that faltering demand for exports amid the US-China trade dispute was having a more damaging effect.

Germany’s manufacturing sector, which has become increasingly geared towards selling goods to China over recent years, recorded the steepest decline in output for seven years. New factory orders deteriorated to the greatest extent since the financial crisis.

Much of the problems for German industry are linked to China’s slowing economy, after Donald Trump imposed import tariffs on Chinese goods in a bitter trade standoff with Beijing. Chinese car sales fell for the first time in almost 30 years last year, in a blow to several German car manufacturers, which count on China as their biggest export market. Germany only narrowly managed to avoid recession last year.

The PMI index, compiled by surveying about 5,000 companies across the euro area, showed Germany and France were the worst performers. Other parts of the eurozone recorded stronger growth.

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Chris Williamson, the chief business economist at IHS Markit, said the survey pointed to GDP growth of about 0.2% in the opening quarter.

Andrew Kenningham, the chief Europe economist at the consultancy Capital Economics, said: “The big picture is that the eurozone economy remains very much in the slow lane, with the German manufacturing recession and wider downturn in Italy dragging the region down.”