- Chinese factory PMI slows
- UK manufacturing eases
- Eurozone manufacturing expands
- BoE seen raising rates before Fed and ECB
FTSE 100: -0.19%
CAC 40: -0.43%
FTSE MIB: -0.85%
IBEX 35: -0.54%
Stoxx 600: -0.56%
Europe stocks declined as investors weighed manufacturing data and market speculation that the Bank of England (BoE) will raise interest rates this year.
Chinese manufacturing activity eased in January, fuelling concerns of slowdown in the world's second largest economy. The purchasing managers' index (PMI) dropped to 50.5 in January from 51 a month earlier, in line with market expectations. However, it was still above the 50 level that signals expansion.
Manufacturing also eased in the UK with the PMI falling to 56.7 last month from 57.2 in December, missing the 57.3 consensus forecast.
On a brighter note for markets, Eurozone manufacturing PMI rose to 54 in January from 53.9 the prior month. Analysts had predicted a reading of 53.9. Growth was driven by Germany which offset a fall in emerging markets.
"January's manufacturing PMI data provide further evidence that the economies of Central Europe are enjoying a decent recovery, but that manufacturing in emerging Europe's two largest economies, Russia and Turkey, is struggling," Capital Economics said.
In the US later on, analysts predict a manufacturing report to show PMI fell to 56 last month from 57 in December.
BoE to lift interest rates, according to analysts
BoE Governor Mark Carney is expected to raise interest rates before the European Central Bank (ECB) and the US Federal Reserve, Bloomberg reported citing economists at Citigroup and Nomura.
The analysts said the strongest growth since 2007 will prompt the UK's central bank to lift its record low benchmark rate of 0.5% as early as this year.
Morgan Stanley sees the BoE lifting rates in the second quarter of 2015 and the Fed increasing in 2016.
"Carney and BOE officials will be looking at the domestic recovery, and if that is strong enough, then they will feel comfortable increasing rates before the Fed," said Jonathan Ashworth, an economist at Morgan Stanley in London and former UK Treasury official. "Tightening by the major developed central banks will be gradual, and they will be aware of what everyone else is doing."
Lloyds Banking Group slumped after saying it set aside £1.8bn in the fourth quarter to cover the cost of compensating customers for mis-sold payment protection insurance.
Ryanair advanced after the airline said price weakness has eased and bookings in the first quarter of 2015 are already significantly higher than a year ago.
Colruyt SA tumbled after the Belgian discount food retailer said it will report a smaller profit for the current financial year, due to slower sales growth and a loss in market share.
Travel retailer Dufry AG slipped as Citigroup recommended selling the shares.
The euro rose 0.16% to $1.3507.
Brent crude futures dropped $0.330 to $106.050 per barrel, according to the ICE.