By Sumanta Dey and Wayne Cole 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.
By Marc Jones LONDON (Reuters) - World markets advanced on Monday despite the conflict in Ukraine, focusing on whether the European Central Bank will announce plans for economic stimulus when it meets this week. Ukraine reported its forces were under fire from Russian tanks again on Monday, as new signs emerged that the turmoil was damaging the European economy. Latin American stocks mostly rose, with Brazil's benchmark Bovespa index leading gains after an opinion poll showed declining re-election chances for President Dilma Rousseff, accused by investors of being excessively interventionist in the economy. Ukrainian President Petro Poroshenko accused Russia on Monday of "direct and undisguised aggression", after warning over the weekend of a possible "full-scale war." European Union leaders were drawing up new sanctions against Moscow.
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. "TIPS have had a good tail wind this year.
By Jason Hovet PRAGUE (Reuters) - Polish manufacturing activity shrank for a second straight month in August and Czech expansion slowed more than expected, adding to signs weaker euro zone economies and crisis in Ukraine are cooling growth in the EU's east. Economies in central Europe have rebounded strongly from a sharp slowdown or even contraction in the past year but are starting to slow, and analysts expect that to continue for the rest of the year even while a longer-term recovery stays on track. Hungary's seasonally-adjusted PMI, calculated using a different methodology, dropped to 51 from 56.6. Central Europe's economies, which share trade links with Russia, are only just beginning to feel the impact of tit-for-tat sanctions between the European Union and Russia over pro-Moscow separatists fighting in Ukraine.
French President Francois Hollande and European Central Bank chief Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union's economy, an official in the president's office said. Draghi called last week for greater emphasis on fiscal stimulus over austerity - comments that irritated German leaders but were welcomed in France because they hinted at a shift away from a current emphasis on budgetary austerity. "I think the diagnosis is a shared one," an advisor to Hollande told reporters after an hour-long meeting between the Socialist president and Draghi at the Elysee presidential palace. The two men shared the view that weak growth and a threat of deflation in the European Union were problems that needed to be addressed, the advisor added.