Euro-zone services PMI finally breached 50 - the point of neutrality - to indicate expansion in the sector for the first time since May 2008, as the index rose to 50.6 in September from 49.9. Manufacturing PMI, however, only rose to 49.0 in September from 48.2, marking the sixteenth straight period of contraction in business activity. The data suggests that consumption, rather than export demand, is paving the way for recovery in the region.
Looking ahead to Thursday, a steady rally in European equities though July and September to the highest levels since October 2008 along with indications of burgeoning economic growth in Germany is likely to underpin the case for a rise in German business sentiment for the month of September. The IFO survey on the business climate is projected to rise to a one-year high of 92.0 from 90.5, led by rising expectations and mild increases in sentiment on currency conditions. Surprisingly strong results could lead the euro to gain following the news on a very short-term basis, but disappointing data would likely have a greater impact, and could trigger sharp declines in the currency.