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Eurozone periphery bonds plunge as mixed PMI data indicates economic recovery

The Eurozone periphery bonds plunged Tuesday after recent purchasing managers index data showed that union’s economic recovery gained speed in August despite the UK’s decision to leave the European Union.

The French 10-year bunds yield jumped nearly 2 basis points to 0.156 percent, Irish 10-year bonds yield rose 3-1/2 basis points to 0.433 percent, Italian sovereign bond inched 4 basis points higher to 1.155 percent, Portuguese equivalents ticked 7 basis points higher to 3.118 percent, Netherlands 10-year bonds yield bounced 1-1/2 basis points to 0.039 percent, Spanish 10-year bonds yield climbed 2-1/2 basis points to 0.965 percent by 09:20 GMT.

The flash August Eurozone sectoral PMIs reveal mixed readings, with the manufacturing PMI falling to 51.8 from 52.0 in July, undershooting expectations of 52.0, whilst the services PMI rises to 53.1, from 52.9 and exceeds the 52.8 market consensus.

As such the composite PMI, which is key for the direction of GDP growth, hardens marginally, to 53.3 from 53.2, also outperforming central expectations of 53.1. This confirms that activity in the Eurozone as a whole continues to proceed at a slightly faster pace, and has not as yet been significantly affected by the UK's vote to leave EU.

Moreover, the Germany Markit flash August manufacturing PMI came at 53.6, in the line of market expectations, from 53.8 in July.

Moreover, France’s services sector picked up pace during the month of July, pushing the country’s composite Purchasing Managers’ Index (PMI) to 10-month high. However, manufacturing dropped for the sixth straight month in July.

France’s composite Purchasing Managers’ Index climbed to a 10-month high of 51.6 from 50.1 in July, data released by IHS Markit showed Tuesday. The factory gauge slipped to 48.5, below the 50 level that divides expansion from contraction. Further, the services PMI rose to 52 in August, the highest since October, from 50.5, the data showed.

Meanwhile, the pan-European STOXX 600 index was up 0.70 percent and the euro-area blue-chip gauge, the STOXX 50 climbed 0.87 percent. The DAX trading 0.64 percent higher and the CAC-40 rose 0.59 percent by 09:20 GMT.

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