The euro tumbled against the dollar and German bond yields dropped to negative territory after IHS Markit's flash purchasing managers' index data pointed to a deeper contraction in manufacturing activity in the eurozone's largest economy.
The flash PMI for the German manufacturing sector fell to a 79-month low of 44.7 in March from 47.6 in the previous month, further below the 50.0 threshold that separates expansion from contraction. Service sector growth slowed slightly as the related flash index slipped to 54.9 from 55.3 in February.
The euro dropped against the dollar shortly after the data was released and was trading 0.65% lower at $1.13 as of 7:40 a.m. ET on March 22. Yields on 10-year German Bunds tumbled 5 basis points to negative 0.006% at around the same time.
Weaker global demand, a slowdown in the car industry and uncertainty surrounding Brexit and U.S.-China trade negotiations significantly weighed on German manufacturing, according to Phil Smith, principal economist at IHS Markit.
The German composite output index, which factors in both manufacturing and services activity, came in at 51.5 in March, down from 52.8 a month ago. Business confidence was at the second-lowest in more than four years as new business inflows fell for a third straight month.
Meanwhile, France's business activity unexpectedly slid back into contraction territory as the pace of new orders waned and staffing expanded at the slowest rate since December 2016. The flash composite output index came in at 48.7 in March from 50.4 in February.
France's flash manufacturing output index declined to 48.8 in March following February's reading of 51.0, while the flash services index fell to 48.7 from 50.2.
Business activity growth in the eurozone slowed in March, as new order growth stagnated for a second consecutive month and backlogs of work declined to the greatest extent in more than six years.
The eurozone flash PMI composite output index fell to 51.3 in March from 51.9 in February. The flash manufacturing output index fell to a 71-month low of 47.7 from February's 49.4, while the services index came in at 52.7, compared with 52.8 in February.
"Any such further loss of growth momentum in the second quarter compared to the 0.2% GDP rise signaled for the first three months of the year would raise doubts on the [eurozone] economy's ability to grow by more than 1% in 2019," said Chris Williamson, chief business economist at IHS Markit.