Europe factories in slump

By Jonathan Cable

LONDON (Reuters) - Factories across Europe put in their worst performance during November since private survey records began more than a decade ago, intensifying pressure for aggressive interest rate cuts this week.

The gloomy news on euro zone and British output was accompanied by data showing inflationary pressures tumbling, removing any doubt that both the European Central Bank and the Bank of England will cut rates on Thursday.

The only debate now is over the size of the cuts, with economists generally agreed there is a greater risk the central banks will deliver larger cuts than the 50 basis point consensus.

The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey's 11-year history and well below the 36.2 flash reading and economists' forecasts.

The European data echoed a survey published overnight showing Chinese manufacturing activity also slumped on a collapse in export orders, a report that came just days after an aggressive interest rate cut there.

A comparable report from the U.S. due at 3 p.m. is expected to show another lurch lower for manufacturing, which is already contracting very rapidly.

"The picture is very grim," said Rainer Guntermann, economist at Dresdner Kleinwort in Frankfurt, describing the euro zone data. "And it's a consistent picture - demand is falling, we're seeing output cuts, a lengthening of delivery times, employment and prices under pressure."

"We stick to the base case for the ECB to cut rates by 50 basis points, but the data would not stand in the way of a bigger rate cut from the ECB," said Guntermann.