Europe Economy Rebounds

Europe's economic recovery is showing surprising strength, as key surveys of business activity and optimism hit their highest levels in years. The data released Tuesday hold out hope that the region is set to see a sustained and marked decline in its unemployment rate from the current 9.5%.

And the good economic news could well add pressure on the European Central Bank to signal a withdrawal of its extraordinary stimulus measures, AP reported.

One of the indicators the ECB looks at when assessing its policy stance is the monthly survey of business activity from financial information company IHS Markit. Once again, it was strong, with the purchasing managers' index—a broad gauge of economic activity—for the 19 countries that use the euro currency unchanged at a six-year high of 56.8 in May.

The results are consistent with quarterly economic growth of 0.6-0.7%, higher than the first quarter's 0.5% growth. Chris Williamson, IHS Markit's chief economist, says the consensus forecast for second-quarter growth of 0.4% may prove "overly pessimistic".

He also noted that job creation has surged to the second-highest in nearly a decade as firms expand capacity and meet rising demand.

The strong purchasing managers' survey comes on top of the 26-year high reached by Germany's Ifo monthly confidence index. It rose to 114.6 points for May from 113.0 in April. Economists had forecast that it would increase, but only to 114.1.

The eurozone grew 0.5% in the first quarter compared to the quarter before, and 1.7% compared to the year-ago quarter.

Germany has been the main engine behind the region's recovery from recession which began four years ago. It's been buoyed by strong exports of its cars and machinery. Stronger consumer confidence due to low unemployment of 3.9% has also supported the recovery.

However, for the region to really push on growth has to come from all corners and a run of surveys are pointing to a pick-up, particularly in France, the eurozone's second-largest economy.

The strong data mean the eurozone is closer to no longer needing extraordinary stimulus provided by the European Central Bank through its €60 billion ($67 billion) in monthly bond purchases. The purchases pump newly printed money into the economy in an attempt to raise inflation that is considered too weak, and to protect the recovery from any new troubles.

The bank has said it will continue the purchases at least through year end. Analysts expect more hints about the bank's future plans at its June 8 meeting and a clear roadmap for tapering the stimulus could emerge in September.

Stocks Rise

European stocks rose Tuesday, with French shares among biggest advancers as eurozone economic activity remained at a six-year high, MarketWatch reported.

The Stoxx Europe 600 was up 0.2% at 391.85, led by technology and financial shares, according to FactSet data. But losses for health care, oil and consumer-related shares weighed.

Travel-related shares edged lower following a suspected terror attack by a suicide bomber in Manchester, England, that killed 22 people, including children, and injured 59 as people left an Ariana Grande concert at the Manchester Arena on Monday night.

On the Stoxx 600, shares of amusement parks operator Merlin Entertainments PLC fell 0.9% and InterContinental Hotels Group PLC slipped 0.1%. But British Airways parent International Consolidated Airlines Group SA was up 0.5% and French hotel chain operator Accor SA was up 0.7%.

Political campaigning ahead of the UK’s general election on June 8 was suspended Tuesday. In London, the UK’s FTSE 100 was up 0.1% at 7,504.22, and the more domestically focused FTSE 250 was up 0.3%.

In Paris, the CAC 40 rose 0.7% to 5,360.52, gaining momentum after IHS Markit said a preliminary reading of French services activity in May rose to 58.0, above the FactSet consensus of 56.8. That helped the composite index reach a 72-month high, although manufacturing output was at a two-month low.

The figures indicated an 11th straight month of private sector growth in Europe’s third-largest economy, said IHS Markit.