The Euro-Zone February manufacturing PMI declined to 33.6 from 34.4 in January, while the services PMI declined to 38.9 from 42.2 in the previous month. Expectations had been for improvements in both readings, which following the rise in January, would have confirmed that confidence is bottoming out. Instead the composite reading fell to a record low of 36.2. Data highlight that risks remain firmly tilted to the downside and that it is far too early to bank on a recovery in the middle of the year. Data will add to pressure on the ECB to cut rates decisively again at the next ECB meeting.

Meanwhile, the German February manufacturing PMI rose to 32.2 from 32.0 in the previous month, while the services PMI slumped to 41.6 from 45.2 in January. The modest improvement in the manufacturing PMI hardly outweighs the marked decline in the French reading, which suggests that the euro zone PMI for the manufacturing sector will come in weaker than expected and decline over the month. After disappointing readings for the services PMI from both France and Germany the euro zone services PMI is also set to decline. Expectations had been for a renewed improvement, which would have confirmed that confidence is bottoming out. The renewed setback highlights remaining downside risks to growth and puts further pressure on the ECB to cut rates again in March.

The French February manufacturing PMI declined to 35.4 from 37.9, while the services PMI dropped to 40.1 from 42.6 in January. Expectations had been for a renewed decline after the January improvement and a confirmation that confidence is starting to bottom out. Instead the readings fell further below the 50 point no change mark, thus pointing to a worsening in sentiment that will question hopes for a stabilization of growth in the middle of the year and will add to pressure on the ECB to deliver another sizable cut at the March meeting. Bund futures jumped higher on the release, with the March future now up 40 ticks on the day at 125.11.



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