At 51.9, up from January’s 49.9, the Italian Manufacturing PMI was at its highest level since July 2014. Analysts were anticipating smaller growth to 50.2. Strong growth in new orders from abroad was a key factor behind the increase in production, which in turn led businesses to expand workforces and raise purchasing levels. Data meanwhile continued to show deflationary pressures, with manufacturers’ input costs and selling prices falling further. 

However, the focus of the session was on Eurozone CPI figures. Euro area annual inflation is expected to be -0.3% in February 2015, up from -0.6% in January. This was above expected inflation of -0.5%. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in February (1.1%, compared with 1.0% in January), followed by food, alcohol & tobacco (0.5%, compared with -0.1% in January), non-energy industrial goods (-0.2%, compared with -0.1% in January) and energy (-7.9%, compared with -9.3% in January).

Separate report on Unemployment Rate showed that seasonally-adjusted unemployment rate was 11.2% in January 2015, down from 11.3% in December 2014, and from 11.8% in January 2014. No change was predicted this month. This is the lowest rate recorded in the euro area since April 2012. The EU28 unemployment rate was 9.8% in January 2015, down from 9.9% in December 2014 and from 10.6% in January 2014.

On Eurozone data front, German Retail Sales and Spanish Unemployment Change figures were released on Tuesday. Retail turnover in January 2015 in Germany increased 5.3% in real terms and 4.1% in nominal terms compared with the corresponding month of the previous year. The number of days open for sale was 26 in January 2015 and 26 in January 2014, too. When adjusted for calendar and seasonal variations, the January turnover was in real terms 2.9% and in nominal terms 2.2% larger than that in December 2014. Analysts were predicting smaller increase by 0.5%.

The number of unemployed people in Spain fell unexpectedly in February, easing concerns over the health of the euro zone’s fourth largest economy. Number of unemployed people declined by a seasonally adjusted 13,500 last month, compared to expectations for an increase of 10,500.

From Eurozone, on Wednesday, Spanish and Italian Services PMI data was released as well as Eurozone Retail Sales figures. Spanish Services PMI posted 56.2 in February, missing forecasts on incline to 56.9 and down slightly from the reading of 56.7 seen in the previous month but still signalling a sharp increase in activity in the Spanish service sector.

Registering 50.0 in February, down from January’s reading of 51.2, the Italian Manufacturing PMI signalled no change in the level of business activity in the service sector compared with one month ago. Analysts were anticipating increase to 51.8.

In January 2015 compared with December 2014, the seasonally adjusted volume of retail trade rose by 1.1% in the euro area and by 0.8% in the EU28. Smaller growth by 0.2% was forecasted. In December retail trade rose by 0.4% in both zones.

European part of the Thurday's session was marked by ECB interest rate decision and following Press Conference. ECB maintained its benchmark interest rate at a record-low 0.05%, in line with market expectations. The central bank also held its marginal lending at 0.30% and left its deposit facility rate unchanged at -0.20%.

“Our monetary policy decisions have worked, and it is with a certain degree of satisfaction that the Governing Council has acknowledged this,” Mario Draghi at a press conference following interest rate decision. “We see objectives are gradually being obtained.”

The new ECB projections reflect “the favorable impact of lower oil prices, the weaker effective exchange rate of the euro and the impact of the ECB’s recent monetary policy measure,” Draghi said, signaling that this was now the ECB’s last stimulus action and an improvement of the economic situation now depends on other factors.

This week markets will be looking at:

French Industrial Production (Tuesday 8:45)