Eurozone PMI plunges as pressure up for big ECB cut

By Nigel Davies

LONDON (Reuters) - The euro zone's services economy fell deeper into recession in November than initially thought, adding pressure on the European Central Bank to cut interest rates on Thursday by more than the 50 basis points expected.

A key survey of euro zone companies also showed that inflationary pressures eased in the euro zone's dominant services sector, making it easier for the ECB to cut rates as widely predicted.

The Markit Eurozone Purchasing Managers Index for services companies, which covers banks to bars, plunged to 42.5 in November from October's 45.8 level, the lowest in the survey's 10-year history.

That was well below the preliminary flash reading of 43.3 and economists' forecasts and considerably below the 50.0 mark that divides growth from contraction.

The revisions will bolster those in the market who are forecasting the ECB to cut rates by more than the 50 basis points that most economists predict at its rate-setting meeting on Thursday.

Similarly, the UK PMI for the services sector shrank at its fastest pace in November since the series began in 1996, boosting expectations of a 100 basis point rate cut from the Bank of England on Thursday.

December bund futures hit a new contract high of 124.04 after the euro zone data, while yields on 10-year bunds fell to 3.0 percent. A move below 2.997 percent would be the lowest in the euro's lifetime. European stocks also extended losses.

"It is quite outstandingly low. There are record lows in all countries apart from Germany, and even Germany was down quite substantially," said Juergen Michels at Citi.