BANGALORE/SYDNEY (Reuters) - Factory activity in Europe and Asia cooled in August after a strong July, as new orders dwindled in the face of escalating tensions in Ukraine and a patchy recovery in China, purchasing managers indexes showed. Despite euro zone manufacturers barely raising their prices, growth in the region slowed slightly more than initially thought, and activity in China's vast factory sector slackened on weak foreign and domestic demand, stoking speculation that further policy stimulus would be needed. "A concerted slowdown in the China, euro zone and UK manufacturing PMIs as the second quarter gets under way raises alarm bells about global demand conditions," said Lena Komileva, chief economist at G+ Economics in London.
European markets cautiously navigated warnings that the conflict in Ukraine was sliding out of control, focusing instead on whether the European Central Bank will strengthen its stimulus plans when it meets this week. Ukraine reported its forces were under fire again from Russian tanks on Monday as fresh signs emerged that the troubles are damaging the euro zone's already-fragile economy. Signs that growth impetus waned in the key industrial engine of Germany, and in Spain and the Netherlands too, is also less than reassuring." Ukrainian President Petro Poroshenko warned at the weekend that a "full-scale war" was imminent if Russian troops continued to support pro-Moscow rebels as European leaders threatened new sanctions.
Fund managers said the rising cost of housing - which accounts for as much as a third or more of various measures of inflation and is outpacing other consumer cost increases - has revived price pressure in the economy.