While an index of euro zone manufacturing and service sector activity rose to a nine-month high, it still showed contraction in both areas. That's consistent with the 17-country euro zone shrinking by 0.5 percent in the fourth quarter. The HSBC flash PMI showed China's manufacturing sector expanded in December at its fastest pace in 14 months as new orders and employment rose, adding to evidence of a pick up in the economy that helped to boost market sentiment.
The data was "a further sign that the Chinese economy is already starting to recover," said Nikolaus Keis at UniCredit. Earlier on Friday, composite PMI data from Germany, Europe's largest economy, showed its private sector bounced back to growth for the first time in eight months in December.
In France, the downturn eased but the PMI held below 50 for the 10th straight month, indicating contraction. The regional euro zone PMI has been below the 50 mark for all but one of the past 16 months but the euro zone agreed a deal on Thursday to provide nearly 50 billion euros in long-delayed aid to Athens. The PMI for the euro zone's dominant service sector rose to 47.8 this month from 46.7, beating forecasts for a rise to 47.0.
The continued downturn came despite firms cutting prices despite their costs rising - cutting into their margins - for the ninth month. Manufacturers, who led the bloc out of the last recession, fared little better. The factory PMI crept up to 46.3 from 46.2, missing forecasts for a steeper rise to 46.6.
But in a further sign the global economy might be improving, the rate of decline in new export orders from factories eased, with the sub-index at a nine-month high of 46.8. The euro zone economy contracted 0.2 percent in the second quarter and 0.1 percent in the third, meeting the technical definition of a recession and a Reuters poll last week predicted a 0.3 percent contraction in the current period. That would be slightly better than the PMIs published on Friday suggest.