Global Economy: China factories see only modest pick-up, Europe stabilises, HSBC, Markit PMIs show

Two separate versions of China's PMI pointed to rising factory output in the world's second-biggest economy, but the pace of the revival in activity in January was uneven.

"Chinese manufacturers received support from robust domestic demand, but were struck by the lacklustre demand from its two main export destinations, Europe and the U.S.," said Nikolaus Keis, an economist at UniCredit.

The U.S. economy unexpectedly contracted in the fourth quarter, according to the advance estimate, although many analysts said there was no reason for panic given that consumer spending and business investment picked up.

The euro zone economy also probably contracted, by 0.4 percent at the end of last year, chalking up its third negative quarter, and will only stagnate in the current period, according to a Reuters poll published last month.

In January the euro zone PMI rose to an 11-month high of 47.9 from December's 46.1, pointing to a continued decline in activity but suggesting the downturn in manufacturing output - which fell for most of last year - has passed its nadir.

The output index, which feeds into a broader gauge of the economy, the composite PMI, due next Tuesday, rose to a 10-month high of 48.7 from December's 46.0. That was the biggest one-month jump in a year.

Financial markets reacted positively to the data with stocks extending gains and the euro rising broadly.

"While still in contraction territory, the manufacturing PMIs signal that upward momentum is spreading and the pace of contraction in

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