Effects of ECB QE disappears over rise in risk from Chinese slowdown

European PMI started the quarter in offbeat mode suggesting Europe's economies are losing steam as most of the effects of European Central bank (ECB) dilutes.

• ECB's QE initially lifted Eurozone into inflation (CPI 0.3% in May) from deflationary and the region has now dipped into deflation once more.
• Equities posted solid initial returns has now wiped out almost all of this year's gains.
• Bond market registered massive buying into bonds, dipping yields to negative for many European countries, has now trading far away from those levels.
• Recently according to Markit data, risk spreads are rising on European corporates.
• Latest unemployment report shows that, unemployment rate actually ticked up by 0.1% to 11% in August.

European economies have both large financial and trade partnerships with emerging markets and now with rapid slowdown in growth across emerging economies including China, along with counter sanctions imposed by Russia.

High level of unemployment along with continued disinflation likely to push ECB to extend its asset purchase program by first quarter next year.

Euro is currently trading at 1.115 against Dollar.