In its meeting held last Thursday, the European Central Bank (ECB) cut its deposit rate, taking it deeper into negative territory, while leaving the other rates unchanged. The ECB Governing Council, headed by president Mario Draghi, lowered the deposit facility rate by 10 basis points to 0.30 per cent.

Economists had expected a cut between 10 to 20 basis points. The main refinancing rate was left unchanged at a record low 0.05 per cent. That was in line with economists’ expectations. The marginal lending rate was held at 0.30 per cent. The ECB had maintained interest rates unchanged for 10 sessions in a row after reducing them by 10 basis points in September 2014.

In the meantime, US manufacturing activity entered contraction territory in November, as the Institute for Supply Management said that its index of national factory activity fell to 48.6. This is the first time the index dipped below 50 since November 2012 and after a reading of 50.1 in October.

Economists had expected the reading to gain slightly to 50.5. Manufacturers, which account for almost 12 per cent of the economy, are battling weak global demand, an appreciating dollar and less capital spending in the energy sector. The slowdown will probably be short-lived as US consumer spending remains healthy, Bradley Holcomb, chairman of the ISM factory survey, said at a conference call.

In the UK, growth in the dominant services sector accelerated in November, putting the recovery on course to strengthen in the final three months of the year. A survey by Markit/CIPS showed the UK services purchasing managers’ index (PMI) rising to 55.9 last month from 54.9 in October, offsetting the weakness shown in manufacturing and construction surveys earlier this week. Economists had expected a weaker reading of 55.0 for the services sector.

The UK’s economy now looks on track to grow 0.6 per cent in the fourth quarter, picking up slightly from the 0.5 per cent expansion in the third quarter, according to Markit.

This report was compiled by Bank of Valletta plc for general information purposes only.