European stocks down on poor manufacturing figures

After a couple of days of buoyancy, European stocks have taken a nosedive on unexpectedly negative manufacturing and service figures revealed this afternoon (February 22nd).

Bloomberg reports that Markit Economics' data shows the region's composite index based on a survey of purchasing managers in the industries dropped from 50.4 to 49.7 in January.

These results indicate the eurozone economy's struggle to rebound from a significant fourth-quarter contraction.

Economists had forecast a modest advance of 50.5 for the Markit index, with the current data proving disappointing, as a reading of under 50 indicates contraction.

Europe's pace of recovery may be stunted by widespread budget cuts, as members of the 17-nation currency battle to stay afloat during the ongoing debt crisis.

Similarly, China's manufacturing could shrink for the fourth month in a row, indicating the superpower remains vulnerable to more slowdown if Europe caps its exports.

In the region's largest economy, Germany, services and manufacturing expansion slowed from 51 to 50 for factories and 53.7 to 52.6 for services.

The composite index of both sectors fell to 52.9 from 53.9 in January.

But in spite of these worse-than-expected results, consumer confidence in the euro area has improved for the second month in a row, with a report released yesterday showing that an index of sentiment advanced to -20.2 from -20.7.

However, government austerity measures and joblessness throughout the region are at their highest level in 14 years, which may restrain household expenditure.

At 16:50 GMT the FTSE 100 was down 0.2 per cent - or 9.9 points - to 5918.2 points, with Barclays, Evraz and Vendeta Resources all faring poorly.

At the same time, the German Dax was down 0.8 per cent to 6848.6 - or 59.55 - and the Parisian Cac 40 plunged 0.4 per cent to 3449.7 - or 15.4 points.