Europe close: Stocks slip lower on Chinese data, oil price decline

European shares slipped at the start of the week as investors digested uninspiring manufacturing figures from the Eurozone and China and a move lower in oil futures ahead of Friday´s key monthly jobs reports Stateside.

The benchmark Stoxx 600 index was down 0.19%, while Germany’s DAX and France’s CAC 40 were off by 0.41% and 0.56%.

Yet even if data out of the US was firm, that could backfire on equity investors as it might keep the Federal Reserve on a tightening course, JP Morgan strategist Mislav Matejka said in a research note sent to clients.

Making matters even worse, volatility linked to China might rear its ugly head again once the New Year holiday had passed, Matejka added.

In his opinion, global stocks were merely seeing a bounce and he warned clients "not to overstay their welcome".

Manufacturing data out of China overnight came in softer than expected. The official purchasing managers’ index printed at 49.4 in January down from a reading of 49.7 for the previous month.

This was below the 50-point mark that separates contraction from expansion, missing economists’ expectations for a reading of 49.6 and marking the weakest level since August 2012.

Meanwhile, the Caixin survey, which tracks smaller firms than the official figures, rose to 48.4 in January from 48.2 in December. This was better than expected but still in contraction.

The official non-manufacturing PMI slipped to 53.5 in January from 54.4 in December, according to the National Bureau of Statistics. Although the reading was weaker on the month, it managed to hold firm in expansion territory.

"If the economy doesn’t show signs of a turnaround in coming months, we would have to downgrade our relatively upbeat view of China’s economic prospects. But we would need to see evidence of clear economic deterioration to believe that markets are correct in anticipating an imminent hard landing. Most recent data suggest instead that growth has stabilised," analysts at Capital Economics said in response to the data.

Meanwhile, Eurozone data showed growth in the bloc’s manufacturing sector slowed at the start of January.

The final Markit manufacturing Purchasing Managers’ Index for January came in at 52.3, in line with the 'flash' estimate and down from 53.2 in December.

Markit said rates of expansion in output, new orders and new export business all eased during the month.

“Worries about the global economy, volatile markets and the appreciation of the EUR in recent months look to have outweighed the boost from the lower cost of oil,” said BNP Paribas.

“Against a backdrop of lower business confidence indicators indicating some downside risks to growth and price indices signalling downward pressures on inflation, we expect the ECB to ease monetary policy further as soon as its March meeting,” it added.

Oil prices were firmly in the red as investors digested the soft Chinese data and amid fading hopes that key producers will cut production.

West Texas Intermediate was down 5.59% at $31.84 a barrel and Brent crude off by 4.23% to $34.52.

On the corporate front, BT Group was in the black after posting a rise in third quarter revenues and unveiling a new restructuring.

Ryanair flew higher after reporting a jump in third quarter profit as traffic grew strongly and the budget airline announced a €800m share buyback programme.

Shares in Bankia advanced after the Spanish bank’s fourth quarter profits beat expectations.

On the downside, Nokia and Alcatel shares tumbled after Nokia settled a patent dispute with Samsung.

Elsewhere, Rolls-Royce was a touch weaker despite announcing a $2.7bn order from Norwegian Air.