EUROPE MARKETS: Euro Falls, Stocks Flat After Fresh Round Of Downbeat Data

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European equities stuck close to the flatline and the euro languished at two-year lows against the dollar on Wednesday, as economic data highlighted the growth challenges the European Central Bank likely will address at its meeting tomorrow.

German's manufacturing sector stagnated in September, with data firm Markit's manufacturing purchasing managers' index falling to 49.9, the first reading below the 50 level since June 2013. A reading below 50 indicates contraction.

Meanwhile, the eurozone manufacturing PMI slipped to 50.3 compared with a previous estimate of 50.5, Markit said. The French manufacturing sector contracted last month, but the deterioration was at its slowest pace in four months.

The near-term outlook looks worrying for the eurozone manufacturing sector as order books are deteriorating for the first time since June of last year, "suggesting output could start to fall as we move into the final quarter of the year," said Markit Chief Economist Chris Williamson in Wednesday's report.

Markets: The Stoxx Europe 600 was down less than 1 point at 343.02, as investors appeared to stay on the sidelines before the European Central Bank makes its policy announcement on Thursday. The euro (EURUSD) fell below $1.26 against the U.S. dollar after the Markit report, hitting an intraday low at $1.2585. The euro fetched $1.2631 late Tuesday in New York.

The U.K. FTSE 100 fell 0.3% as shares of supermarkets Sainsbury and Tesco were hammered.

The U.K. also received downbeat data from Markit, as Britain's manufacturing sector in September expanded at the slowest pace in 17 months. The pound (GBPUSD) dropped below $1.62 in the wake of the report.

"The strong upsurge in U.K. manufacturing sector at the start of the year appears to have run its course," said Rob Dobson, Markit senior economist, in a note.

"September's disappointing reading will therefore add to the air of caution as to whether the [U.K.] economy is ready for higher interest rates," he said.

In Frankfurt, the DAX 30 index moved up 0.1%, topped by a 3.1% rise in Adidas AG after the German sports wear retailer said it will pay as much as 1.5 billion euros ($1.9 billion) back to shareholders by the end of 2017

In France, the CAC 40 shed 0.1%.

Wednesday's action also included the trading debut of shoe and fashion retailer Zalando SE on the Frankfurt stock exchange. The shares opened at EUR24.10 ($30.40), above the EUR21.50 issue price. They were at EUR22.88 in midmorning trade.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires