British and euro zone manufacturing eased in August, following a contraction in China's industry. As David Pollard reports, it rattled markets and reinforced expectations policymakers will need to ease policy further.
Top marks for Spain from Wolfgang Schaeuble. The German finance minister gave Madrid a big tick for doing things right, when he met his Spanish counterpart in Berlin. While hinting some other euro zone economies could do better. (SOUNDBITE) (German) GERMAN FINANCE MINISTER, WOLFGANG SCHAEUBLE, SAYING: "The unusual thing about Spain is that it actually did what it agreed to do." Although, in fact, some other countries are doing better. Italy's growth has been revised up to 0.3 per cent on strong domestic demand. And a sharp decline in its jobless numbers adds to the euro zone's lowest unemployment rate in three years in July - with Germany's jobless rate now confirmed at a record low. But in a mixed bag of data, euro zone manufacturing indicators eased in August. That's despite factories barely raising their prices. Worries over China are dragging on confidence, says CMC analyst, Michael Hewson. As are concerns closer to home. (SOUNDBITE) (English) MICHAEL HEWSON, CHIEF MARKET ANALYST, CMC MARKETS, SAYING: ''Q3 and Q4 could well be challenging ... With respect to Greece ... we've got the uncertainty of the 20th of September elections. We've got elections due in Spain and Portugal. They're going to feed into that narrative of political uncertainty.'' And will add to pressure on the European Central Bank. Euro zone inflation was confirmed at just 0.2 per cent on Monday - the bank's target is nearly 2 per cent. It's a conundrum it's unlikely to try to solve at its next policy meeting this Thursday. But with interest rates already at record lows, and the ECB fully committed to a 60 billion euro a month bond-buying programme, many wonder how it can solve it at all.