- Eurozone inflation slows
- Euro-area unemployment rate falls
- Chinese manufacturing contracts
FTSE 100: -0.38%
C AC 40: -0.10%
FTSE MIB: -0.38%
IBEX 35: 0.33%
Stoxx 600: -0.30%
European stocks slumped as Eurozone inflation slowed more than forecast in May.
Consumer prices in the euro-area fell to 0.5% last month from 0.7% in April, according to the European Union's statistics office in Luxembourg today.
Economists had predicted a decline to 0.6%.
The data comes ahead of Thursday's European Central Bank (ECB) meeting when the monetary authority is expected to loosen its policy to address weak inflation. The ECB is targeting inflation of just under 2%.
The euro gained 0.09% to $1.3609 following the news.
"The rally in the euro was nothing spectacular following the release and it has pulled back since, but it does make me question exactly what the markets have priced in ahead of the ECB meeting on Thursday," said Craig Erlam, Market Analyst at Alpari UK.
"This would suggest that the markets are pricing in something much more aggressive than I am currently anticipating, be it quantitative easing or negative deposit rates. I don't believe the ECB will be quite so bold this week and therefore expect traders to be very disappointed, once again. This would suggest we've seen too much selling in the euro in recent weeks and makes me a little bullish heading into the decision."
Also in the Eurozone, the unemployment rate unexpectedly fell to 11.7% in April from 11.8% a month earlier. Analysts had forecast the rate to remain unchanged.
"May's fall in Eurozone inflation and the still high level of unemployment in April will add to the pressure on the ECB to provide more policy support in order to address the growing risks of deflation in the single currency area," Capital Economics said.
Meanwhile, in China, the purchasing managers' index (PMI) from HSBC Holdings Plc and Markit Economics climbed to 49.4 in May from 48.1 in April. It missed the 49.7 forecast and was under the 50 level that signals expansion.
In the US later on, will be the release of factory orders which is expected to rise by 0.5% in April following a 1.1% increase a month earlier.
Federal Reserve official Esther George is also due to speak on the US economy.
InterContinental Hotels Group retreated as its Chief Executive Richard Solomons said his company can grow on its own without a merger or takeover.
Wolseley rallied as the world's biggest distributor of plumbing and heating products reported third quarter like-for-like sales growth of 5.1%.
Pennon declined after saying its Viridor landfill and waste recycling business took a hit from cut-throat pricing by rivals in its full-year results.