European stocks advanced, erasing earlier losses, after Italy’s better-than-expected economic data helped confirm a trend of stronger manufacturing in the euro area.
The Euro Stoxx 50 index was 0.4 percent higher as of 9:40 a.m. in London, while the UK and Swiss markets remained closed for a holiday. The DAX index in Germany, the region’s biggest economy, jumped 0.8 percent and headed for its best day in almost three weeks.
The Stoxx Europe 600 Index was up 0.5 percent, after slipping 1.2 percent in 2016, underperforming the S&P 500 index in the US, which gained 9.5 percent from 2015.
Italy’s FTSE MIB was up 1.3 percent Monday. Data showed the country’s manufacturing PMI rose to 53.2 for December versus 52.2 in November, while economists expected 52.3. The FTSE MIB had ended 2016 down 10 percent, hurt by political uncertainties as well as investor concern over the strength of the country’s banking system. German shares were led by gains in lender Commerzbank AG and utility RWE AG. A report showed manufacturing PMI reached 55.6 in December, the highest reading since January 2014. Euro-area manufacturing expanded last month at the fastest rate since April 2011, in a sign that the currency bloc’s recovery was intact heading into 2017.
Euro-area manufacturing, meanwhile, expanded last month at the fastest rate since April 2011, in a sign that the currency bloc’s recovery is intact heading into 2017.
A Purchasing Managers’ Index climbed to 54.9 in December, IHS Markit said on Monday. The reading matches the initial estimate on Dec. 15 and was up from 53.7 in November. Higher import costs resulting from a weaker euro, combined with increased global commodity prices, led to the sharpest inflation for average purchasing costs in more than five-and-a-half years.
The European Central Bank has extended its stimulus program until at least the end of the year as it strives to return consumer-price growth to its goal of just under 2 percent. While inflation looks set to accelerate in coming months, officials are concerned that core prices—excluding energy and food—have so far shown no convincing upward trend.
“Euro-zone manufacturers are entering 2017 on a strong footing, having ended 2016 with a surge in production,” said Chris Williamson, chief business economist at IHS Markit. “Policy makers will be doubly-pleased to see the manufacturing sector’s improved outlook being accompanied by rising price pressures.”
PMI readings rose in all seven of the countries in the survey, with growth strongest in the Netherlands and Austria. Germany’s gauge was at the highest in three years, France’s in more than five years, and Spain’s in 11 months. Italy’s pace of growth improved and Greece’s contraction eased.
The euro fell after German data were published and extended declines following the euro-area report. The single currency traded at $1.0480 at 10:12 a.m. Frankfurt time.
The average euro-area PMI reading over 2016 was the highest since 2010, IHS Markit said.