Growth in euro-area manufacturing and services slowed in Aprilin a sign that bondpurchases by the European Central Bank (ECB) will take time torevive a fragile recovery.

A Purchasing Managers Index (PMI) for both industries fell to53.5 from 54 in March, London-based Markit Economics said onThursday. While the reading remains well above the 50-point markthat divides expansion from contraction, it is below the 54.4forecast by economists in a Bloomberg survey.

“The weaker rate of expansion is a big disappointment, givenwidespread expectations that the ECB's quantitative easing willhave boosted the fledgling recovery seen at the start of the year,”said Chris Williamson, chief economist at Markit. “However, it'stoo early to draw firm conclusions about whether growth isfaltering again and the effectiveness of policy.”

While ECB President Mario Draghi has already pointed to somepositive effects created by the 1.1 trillion-euro (US$1.2 trillion)plan, he has also cautioned that the region's recovery won't besustainable without government reforms. Investors have begun tolose some of their confidence in the performance of Germany,Europe's largest economy, as global weakness damped exportprospects.

Chinese Slowdown

A Chinese manufacturing gauge fell to a 12-month low in April,suggesting government efforts to cushion a slowdown have yet torevive the nation's factories. First-quarter data showed theweakest economic expansion since 2009, prompting policy makers tocut banks' reserve requirements by 1 percentage point this week inan effort to halt the slide.

European bonds climbed and the euro weakened with the region'sstocks and U.S. equity-index futures after theweaker-than-estimated PMI reports.

Yields on German 10-year bonds fell two basis points by 10:24a.m. in Frankfurt, as the euro slipped 0.1 percent to $1.0719 andthe Stoxx Europe 600 Index dropped 0.8 percent. Contracts on theStandard & Poor's 500 fell 0.5 percent.

Weakness in Europe and Asia is putting the focus back on U.S.economic data, with initial jobless claims data and a factoryreport due Thursday.

“It remains to be seen whether April's slowdown in manufacturingand services expansion is primarily a correction following fourmonths of improvement, or signs that the pickup in Eurozoneeconomic activity is leveling off,” said Howard Archer, chiefEuropean economist at IHS Global Insight in London. “It could bethat heightened concern over the Greek situation is having somedampening impact.”

Greek Uncertainty

The ECB has almost doubled an increase in emergency funding toGreek banks from last week before political talks shift to Brusselsand Latvia over the country's bailout review. Greek FinanceMinister Yanis Varoufakis said on Tuesday that an April 24 meetingin Riga is probably too soon to seal an agreement, and euro-areafinance ministry officials have expressed doubts about whetherGreece's incremental progress would be enough to unlock emergencyloans.

Euro-area services activity dropped to 53.7 from 54.2 in March,while a similar index for the manufacturing industry fell to 51.9from 52.2, Markit said. Gauges for both industries also signaledslower growth in Germany and France, while output in the rest ofthe euro region expanded at the strongest pace since August 2007,according to the report.

PMI data are “indicative of the Eurozone economy growing at areasonably robust quarterly rate of 0.4 percent at the start of thesecond quarter,” said Williamson. Output rose at the same rate inthe first three months of the year, according to a separateBloomberg survey.

ECB projections released in March foresee growth acceleratingfrom 1.5 percent this year to 2.1 percent in 2017.

– With assistance from Kristian Siedenburg in Vienna and HarumiIchikura and Ainhoa Goyeneche in London.

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