Fresh fears that the eurozone was heading for recession kept up the pressure on the euro on Thursday as concerns about the outlook for global growth gathered pace.

But US and European equity markets staged a rebound after two days of losses as oil prices retreated. Confirmation that the eurozone economy had contracted in the second quarter - by 0.2 per cent - hardly came as a surprise, given the grim picture of the region painted by recent data, particularly out of Germany.

Indeed, German GDP shrank by a smaller- than-expected 0.5 per cent, although this was offset by an unexpected decline in the French economy. Meanwhile, other data showed that the rate of headline eurozone inflation had been revised down from the "flash" estimate of 4.1 per cent to 4 per cent. Martin van Vliet, economist at ING, said the GDP data would be likely to fuel fears of a technical recession in the eurozone.

"The protracted economic slowdown should over time dampen underlying inflationary pressures in the eurozone. However, with inflation running at double the ECB's target of just below 2 per cent, and with the lingering risk of a wage-price spiral, the ECB will remain reluctant to lower its guard on inflation."

Continued at FT