By Jonathan Cable

LONDON, Oct 5 (Reuters)The euro zone’s economic recovery faltered in September with growing evidence sectors and countries in the bloc are diverging as a resurgence of the coronavirus forces the reimposition of restrictions on activity.

A rise in infection rates in Europe, which a Reuters poll concluded last month was the biggest threat to the economic recovery, will concern policymakers who had hoped the euro zone economy was healing after contracting an historic 11.8% in the second quarter. ECILT/EU

Monday’s purchasing managers’ surveys showed services activity, which accounts for around two-thirds of the bloc’s GDP, slammed into reverse after sister surveys last week suggested factories was enjoying something of a revival.

There was also a split between the currency union’s member countries. While Germany’s service industry barely grew in September, strong manufacturing helped the private sector in Europe’s largest economy remain on track for a solid recovery.

But French business activity fell for the first time since June and in Spain the services sector sank deeper into the red as travel restrictions ravaged the summer tourism season.

Italy’s services industry contracted for the second month running with no sign of recovery on the horizon.

“The recovery in industry had been lagging but does seem now to have been catching up whereas services really is bearing the brunt of tighter restrictions,” said Jessica Hinds at Capital Economics.

“In Spain and France in particular, and elsewhere in the euro zone, there has been a tightening up. Fears of a resurgence are adding to consumer caution,” Hinds said.

Meanwhile, Britain’s economy, outside the currency union, proved more resilient than initially thought last month, despite a tightening of lockdown restrictions and an end to a temporary government subsidy for businesses such as restaurants and bars. GB/PMIS

EXTRA SUPPORT

BRUSSELS/FRANKFURT (Reuters) – Euro zone inflation fell deeper into negative territory last month, raising pressure on the European Central Bank to add stimulus, as an ongoing recession will keep price growth below its target for years to come.

Annual inflation in the 19 countries sharing the euro fell to minus 0.3% in September, its lowest in more than four years, from minus 0.2% a month earlier. That fell short of expectations for an unchanged reading, data from Eurostat showed on Friday.

More worryingly for ECB policymakers, underlying inflation, which excludes volatile food and energy costs, fell to 0.4% from 0.6%, far from the ECB’s target of almost 2%. Services inflation slowed further and the cost of imported industrial goods fell.

Although the ECB has unleashed unprecedented stimulus this year to combat a pandemic-induced economic shock, rising unemployment, surging savings, widespread restrictions on travel and plummeting business investment have proved an exceptional drag on prices.

A second wave of the coronavirus is likely to add to the gloom, which torpedoes confidence and weighs on prices further, economists say.

While the ECB held fire last month, it kept the door wide open to more stimulus. Board member Fabio Panetta made a clear case for preemptive action, arguing that the cost of doing too much is smaller than the cost of inaction.

His argument is further supported by a tumble in an even narrower core inflation reading, which also excludes alcohol and tobacco prices, to 0.2% from 0.4%.

Still, no ECB move is likely in October. Policymakers have long said that more data, particularly on 2021 fiscal policies, will be needed before they can take a fresh decision.

They have also prepared markets for bad inflation readings, arguing that price growth could stay negative for the rest of the year before a steady

By Dhara Ranasinghe

LONDON, Oct 2 (Reuters)The pile of negative yielding euro zone government bonds rose in September to just over 6 trillion euros from around 5.4 trillion a month earlier, Tradeweb data showed on Friday, the latest sign that global uncertainty has renewed demand for safe assets.

A rise in COVID-19 cases in Europe, concern about the economic outlook and unease ahead of a looming U.S. election has pushed down sovereign bond yields globally.

In Europe, where 10-year German bond yields notched up their biggest monthly fall in five months in September, that has meant an even deeper push into negative-yield territory DE10YT=RR.

According to Tradeweb data, around 68.6% or just over 6 trillion euros of the 8.9 trillion euro government bond market had negative yields as of the end of September.

That was up from around 62% at the end of August and marked the highest share of negative-yielding debt on the platform since September 2019.

“Euro rates are moving lower again and there are lots of reasons for that but a big one is that inflation and inflation expectations are weak and that’s increasing expectations for more ECB easing and cementing the negative-yielding bond pile,” said Antoine Bouvet, senior rates strategist at ING.

The pool of negative-yielding investment grade corporate bonds also rose to stand at around 997 billion euros as of the end of September, or nearly 29% of a total market worth around 3.4 trillion euros, Tradeweb said. That was up from 872 billion euros as of the end of August.

Roughly 49% or 1.2 trillion pounds ($1.55 trillion) of UK government bonds traded on the Tradeweb platform of a total market worth almost 2.5 trillion pounds had negative yields as of end-September. That was up marginally from August.

Euro zone

By Yoruk Bahceli

AMSTERDAM, Oct 2 (Reuters)Italy’s 10-year bond yield fell to a record low on Friday before a key reading is expected to show persistent deflation in the euro area, while investors favoured safe-haven assets after U.S. President Donald Trump tested positive for the coronavirus.

Investors will pour over the first estimate of euro zone inflation for September to gauge just how weak the euro zone economy is amid signs of divisions with the European Central Bank.

Economists in a Reuters poll expect euro zone inflation to have fallen 0.2% year-on-year in September, unchanged from August, the first time the rate was negative since 2016. But markets are likely primed for a lower figure after German and Italian inflation came in far below forecasts this week.

Meanwhile, investors globally shunned risk in favour of safe-haven assets as Trump’s positive test results added to uncertainty around the highly-contested election in November.

Demand for fixed income broadly pushed Italy’s 10-year yield to a record low at 0.75%, down 3 basis points on the day, according to Tradeweb, which cites the August 2030 benchmark.IT10YT=TWEB

Italian bonds continued to see support this week, despite talks of delays to the European Union’s recovery fund, after regional elections in late September reduced the risk of snap national elections.

Safe-haven German 10-year yields fell as low as -0.551% in early trade DE10YT=R just a touch off their lowest in nearly two months hit earlier this week. They were last down 1 basis point at -0.54%. DE10YT=RR

“With Trump testing positive and euro core inflation set to fall to a new record low, a payrolls miss could push Bunds to highs not seen since May,” said Commerzbank’s head of rates and credit research Christoph Rieger.

The 10-year German yield had fallen as low

In March, the price of Bitcoin plunged by more than 50% to below $3,600. Since then, the dominant cryptocurrency has rallied by 197% to $10,700. At its yearly peak in August, BTC rose to as high as $12,500 across major exchanges.

Since March, a “buy zone” signal of the Bitcoin hash ribbon indicator has been a persistent BTC catalyst. The historically accurate macro on-chain indicator is hinting an uptrend for BTC again, after first lighting up in March.

In an interview, on-chain analyst Willy Woo explained that the hash ribbon has been in the “buy zone” since March. It recently broke out of the zone, suggesting that a broader uptrend could occur.

What The Hash Ribbon Indicator Is And Why It’s Significant For Bitcoin Price

Bitcoin is widely perceived as a store of value and a currency. Jack Dorsey, the CEO of Twitter and Square
SQ
, said he sees BTC becoming the world’s sole currency by 2030.

Under that is a blockchain network that is maintained by computing power contributed by miners. The amount of computing power supporting the Bitcoin blockchain is a highly important metric to measure the blockchain’s fundamental strength.

The amount of computing power on Bitcoin is called hashrate. If the hashrate increases, it suggests that more miners are contributing computing power to the blockchain. 

The basic theory of the hash ribbon indicator is that a Bitcoin bull cycle begins when miners capitulate. The term capitulation refers to when miners sell a significant amount of BTC, or smaller miners get shaken out. Capitulation could occur when the price of Bitcoin is too low for mining to be profitable.

When capitulation occurs, there