Ukraine tensions hurt Euro Zone growth

Reuters London | Updated on March 12, 2018 Published on September 03, 2014

Poor results The EU's economy stalled in the second quarter. REUTERS

World markets jump after Ukraine and Russia announce peace plan

Euro Zone business grew at the slowest rate this year in August and retail sales plummeted in July as escalating tension between Russia and Ukraine subdued spending and investment, surveys showed on Wednesday.

Signs of slower growth, coupled with firms cutting prices at an even faster rate but still failing to drum up sales, will add to pressure on the European Central Bank ahead of its monetary policy meeting on Thursday.

Optimism about the future among service firms, which dominate the bloc’s economy, fell to its lowest level this year amid rising tension over Ukraine that triggered sanctions from the West and countermeasures from Russia.

Although the Ukrainian president’s press office said on Wednesday he had reached agreement with Russia’s Vladimir Putin on a “permanent ceasefire” in eastern Ukraine’s Donbass region, uncertainty about the situation on the ground remained.

The Kremlin later said the presidents had agreed on steps towards peace but a ceasefire had not been agreed between Moscow and Kiev because Russia is not a party to the conflict.

Better performance

World markets jumped after the initial declaration before trimming gains — Britain’s top share index touched a fourteen-and-a-half-year high. Markit’s Composite Purchasing Managers’ Index fell to an eight-month low of 52.5, well below July’s 53.8. The Euro Zone economy stalled in the second quarter and private sector growth in Germany, Europe’s powerhouse, eased to a 10-month low in August. In another sign of weakness, retail sales across the region fell 0.4 percent in July as expected, the first drop this year.

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Published on September 03, 2014
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