EUROPE MARKETS: Not-so-bad PMIs Lift European Stocks Out Of The Red

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- After a lackluster start to the day, European stock markets pitched higher on Thursday after the latest health check on the eurozone showed the region is in better shape than expected.

Data: A fresh round of purchasing managers' indexes helped lift the trading mood, with the manufacturing PMI for the eurozone unexpectedly climbing to a two-month high of 50.7 in October. Analysts at HSBC had expected the component to drop below 50, which would have signaled the first month of contraction since June 2013. A level above 50 signals expansion.

The PMIs for Germany also surprised to the upside. The manufacturing sector moved back above the 50 level, while the services reading climbed to a four-month high.

It was a more downbeat picture in France, with PMIs showing factory activity dropped to a two-month low.

In Spain, there was good news on the labor market, the third-quarter unemployment dropped to the lowest level since 2011 at 23.7%, down from 24.5% in the second quarter.

U.K. retail sales fell in September, down 0.3%.

Market reaction: The Stoxx Europe 600 index traded with a more than 1% loss early in the day, but moved higher after the German and eurozone PMIs were released. The benchmark rose 0.2% to 326.70.

Germany's DAX 30 index climbed 0.6% to 8,993.44, while France's CAC 40 index added 0.6% to 4,128.16.

The euro (EURUSD) dropped right after the French PMI data, but recovered to trade at $1.2659, up from $1.2648 late Wednesday.

The U.K.'s FTSE 100 index lost 0.3% to 6,379.36. It was weighed by supermarket chain Tesco PLC , which slumped 5.1% after a weak earnings report and on news its chairman was stepping down after an internal review found a history of accounting errors.

The pound (GBPUSD) dropped to $1.6015 after the U.K. retail sales data. The pound traded around $1.6050 late Wednesday.

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