UK manufacturing activity outperforms that of the Eurozone's

Unsurprisingly, manufacturing activity jumped higher in the UK and outperformed that of the Eurozone’s, which remained lacklustre last month ahead of the European Central Bank’s upcoming bond-buying programme.

Data from the UK on Monday showed Markit’s purchasing manages' index for manufacturing activity jumped to a seven-month high of 54.1 in February, up from 53.1 in January.

Above 50 signifies expansion while below that level indicates contraction. The UK data indicates that after a slowdown in the tail-end of last year, the manufacturing sector is showing signs of recovery in 2015 as growth rates of both production and new orders strengthened in February.

“Strong growth in household incomes this year should provide firm foundations for the manufacturing sector’s recovery,” said Samuel Tombs, economist at Capital Economics.

By contrast, manufacturing output in the Eurozone remained lacklustre last month with PMIs at 51, off slightly from a 51.1 flash reading published in February and unchanged from January's reading of 51.

Despite the uninspiring performance for the broader manufacturing index, the Eurozone’s PMI index does stay above the 50 mark and reached a six-month high in January, highlighting an up-trend in growth together with confidence on the back of improving data out of nations like Italy and Ireland.

Looking at the breakdown of the Eurozone data, the French component for manufacturing fell to 47.6, down from 49.2 in January as sharper falls in output, new orders, employment and stocks of purchases weighed on the index for France.

Germany's however outperformed neighbour France with PMI improving to 51.1, ahead of economists' expectations of a reading of 50.9. Ireland's manufacturing sector reached a 182-month high of 57.5 in February while Italy’s PMIs jumped above 50 for the first time in five months in February, reaching 51.9.

Furthermore, there’s an increase in confidence over the Eurozone’s growth prospects which should directly benefit the manufacturing sector in forthcoming months. With receding worries about a ‘Grexit’ and the ECB’s launch of the bond-buying programme, market participants are viewing the manufacturing report as positive given it does not show a marked drop off in economic growth.

Ahead of the ECB’s first round of quantitative easing, peripheral yields have hit record lows in Monday’s session with Portuguese 10-year government bond yields now at 1.799% while the Italian 10-year is at 1.3%. Both are fresh record lows.