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Eurozone manufacturing PMI edged up to 51.6 in November (flash 51.5) from 51.3 in October.
Holland, Austria, Germany, Ireland and Italy performed well, but France remains a concern.
Output, new orders and new exports expanded for the fifth successive month but failed to halt the ongoing slide in employment, says Markit.
"Manufacturing across the region is enjoying its best performance for two-and-a-half years, but the pace of growth remains only modest," says Markit. "The data suggest that output is rising at a quarterly rate of only around 0.6% in the fourth quarter so far."
Improving exports in countries such as Italy, Spain and Ireland are offsetting domestic weaknesses, "underscoring how producers in these countries are becoming more competitive and suggesting the long-term outlook is brightening."
The euro is -0.1% at $1.3577 after being positive earlier. (PR)
The Ifo institute's business climate index increased to its highest since April 2012, rising to 109.3 this month from 107.4 in October and topping consensus of 107.7.
The current-situation reading rose to 112.2 from 111.3 and vs forecasts of 111.6, while a measure of expectations climbed to 106.3 from 103.7 and vs 104.
The Ifo index "continues its underlying upward trend, which is consistent with a progressive improvement of the economy," says economist Annalisa Piazza. "Prospects for the future remained bright in November." (PR)
As expected, Eurozone flash manufacturing PMI has edged up to a 29-month high of 51.5 in November from 51.3 in October.
However, services slipped to 50.9 from 51.6 and missed consensus of 51.9.
Composite output declined to 51.5 from 51.9 and fell short of forecasts of 52.
Manufacturing output edged down to 52.8 from 52.9.
"It looks like momentum is being lost again," says Markit. "Deflationary forces may be gathering," while growth outside the "big two" of Germany and France "slowed to near-stagnation." French activity actually contracted.
Overall, the data is indicating that eurozone GDP will rise a "very modest 0.2%" in Q4, says Markit. The second-successive fall in PMI "suggests that the ECB was correct to cut interest rates to a record low at its last meeting."
French flash manufacturing PMI has fallen to 47.8 in November from 49.1 in October and missed consensus of 49.5.
Services dropped to 48.8 from 50.9 and vs 51.
Manufacturing output declined to 47.2 from 49.
Composite output slipped to 48.5 from 50.5.
"The poor set of figures underline the fragility of the economy in the face of a persistently anemic demand environment," Markit says. "Although remaining above the levels seen in the first half of the year, PMI data highlight the risk of a return to recession for France in Q4 following the 0.1% fall in GDP during Q3."
The CAC 40 (EWQ) take a dive and is -0.9%. The euro also tumbles and is -0.3% at $1.3402. (PR)
A tweet from Bloomberg saying the ECB is mulling a negative deposit rate as a way for more stimulus sends the euro (FXE -0.6%) lower by nearly 100 pips in a manner of minutes.
The ECB, of course, surprised a few with a benchmark lending rate cut to 0.25% earlier this month (the deposit rate remained at 0%), then board member Peter Praet dropped a bombshell with the suggestion of Anglo-Saxon style QE coming to Europe.
The moves have succeeded in weakening the euro from a lofty $1.38 to the current $1.3461.
As expected, Eurozone CPI dropped 0.1% on month in October vs +0.5% in September.
On year, inflation fell to +0.7% (also in line) vs +1.1% previously.
Core CPI +0.8% vs +1%.
Inflation fell further away from the ECB's target of just under 2%, possibly giving the bank even further room to cut interest rates to zero - although the German's would surely have something to say about that - following the surprise reduction last week to 0.25%. (PR)
EU stocks are mixed heading towards midday following the Yellen-induced rally yesterday, with the EU Stoxx 50 -0.1%, London +0.3%, Paris flat, Frankfurt flat, Milan -0.7% and Madrid -0.1%.
The Germans have lost control of the ECB, writes Ambrose Evans-Pritchard, citing the "astonishing" interview governing council member Peter Praet gave to the WSJ yesterday. The chat opened the door to Fed-style QE to put an end to the deflation in southern Europe.
""That is a radical change of position for the ECB and a very welcome one in our view," says BNP Paribas' Ken Wattret. "The patience of the majority of Council members towards the ‘blocking minority,' which has led to a worryingly slow policy response to persistent below-objective inflation to date, has been exhausted. The plunge in inflation in October has been the trigger."
The Germans aren't pleased, with the IFO's Hans Sinn blasting the ECB for cutting rates last week, domestic tabloids screaming about the destruction coming to German savings from an Italian-controlled central bank, and the Bundesbank's Andreas Dombret worrying today about the risks to financial stability from near-zero rates.
Is it "look out below" for the euro (FXE), which is a couple of cents off recent highs, but well above its level of one year ago?
Eurozone Q3 GDP (Q/Q): +0.1% versus +0.2% expected and +0.3% previous.
The euro (-0.3%) drops to session lows against the greenback on the news as investors view the weaker-than-expected data as evidence that the ECB will need to maintain an ultra-accommodative policy stance for the time being.
Schlumberger (SLB) has been selling bonds in euros, Bloomberg reports, as the cost of borrowing in the currency relative to U.S. dollars approaches the cheapest in almost five years.
SLB issued €500M ($671M) of notes due March 2019 to yield 37 bps more than the mid-swap rate, as the average yield difference between investment-grade bonds in euros and comparable dollar notes widened 11 bps in the past week to 1.33 percentage points.
SLB’s deal adds to €3.75B of bonds sold by U.S. companies last week, the busiest period since May 2009, according to data compiled by Bloomberg.
The euro (FXE -0.3%) tumbles 50 pips after ECB member Peter Praet - in a chat with the WSJ - suggests asset purchases or negative rates are tools the central bank could use if necessary to lift inflation up to its target. "If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal."
Challenging $1.40 not long ago, the euro has dropped to $1.3392 in the few days since a report showed inflation dipped to 0.7% in October, well below the ECB's 2% target.
The ECB has since cut its benchmark lending rate 25 basis points to 0.25%. The deposit rate has been zero for some time.
The easing stance of the ECB is off sharp contrast with the Fed and Bank of England, both of which are making noises about tighter policy.
UUP +0.4% premarket as the dollar gains across the board behind the strong jobs print. The greenback is making its biggest move vs. the yen (FXY -0.7%), but is also higher vs. the euro (FXE -0.4%), pound (FXB), Swiss franc (FXF), and aussie (FXA -0.5%).