Euro and stock markets dip on disappointing PMI data

Business activity in the eurozone dipped unexpectedly at the start of the second quarter, placing strain on the euro and European stock markets.

New purchasing managers' index (PMI) data published by Markit, based on an expected 85 per cent of usual monthly responses, revealed a drop from 54 in March to 53.5 in April.

The slower rate of growth recorded this month was attributed to weaker rates of expansion in France and Germany, hampering impressive acceleration in the rest of the region, which enjoyed its fastest upturn since August 2007.

In Germany, the slowdown was fueled by weaker increases from the manufacturing and services sectors, although the country's growth remained slightly higher than the pace of expansion seen across the region as a whole.

The situation was less positive in France, where growth slowed almost to a complete halt. Service sector expansion neared stagnation, while factory output declined at a faster rate.

Chris Williamson, chief economist at Markit, said the figures were a "big disappointment" - particularly given the widespread positivity surrounding the European Central Bank's major quantitative easing programme.

"However, it's too early to draw firm conclusions about whether growth is faltering again and the effectiveness of policy," he stressed. 

"Although the PMI has pulled back from March's recent high, the index remains above the average seen in the first quarter and is indicative of the eurozone economy growing at a reasonably robust quarterly rate of 0.4 per cent at the start of the second quarter."

Off the back of the data, European stock markets halted early gains that had been spurred by multi-year highs in Asia.

The euro also dipped against the dollar, although European bond markets generally held firm against the PMI figures and were steady after a lively day of trading on Wednesday, led by the strong performance of UK Gilts GB10YT=RR and German Bunds DE10YT=RR.