September 23, 2019 / 11:52 AM / 2 months ago

Euro zone money markets accelerate rate cut bets on poor PMI

FILE PHOTO: Sign of the European Central Bank (ECB) is seen ahead of a news conference on the outcome of the Governing Council meeting, outside the ECB headquarters in Frankfurt, Germany, March 7, 2019. REUTERS/Kai Pfaffenbach/File Photo

LONDON (Reuters) - Euro zone money markets on Monday showed investors have brought forward expectations for a rate cut from the European Central Bank after poor manufacturing and services data elevated concerns about a recession.

Eonia money market futures dated to the ECB’s March 2020 meeting show 10 bps worth of rate cuts are now priced in, up from around 8.8 bps earlier on Monday ECBWATCH.

According to analysts, this is roughly the same as saying markets are fully pricing such a move. Since the ECB’s Sept 12 meeting, markets have scaled back rate-cut bets and had fully anticipated a 10 bps cut by April next year.

German private sector activity shrank for the first time in 6-1/2 years in September as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum.

Analysts said the data is particularly concerning as services had largely been immune to the contraction in manufacturing, but now show signs of a substantial contagion.

Reporting by the Yoruk Bahceli; Editing by Dhara Ranasinghe

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