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European stock benchmarks were mixed on Thursday, with the FTSE 100 erasing early gains as stronger-than-expected manufacturing data was seen as decreasing the likelihood of an interest rate cut

London's benchmark index was recently down 0.08% at 6,776.20 after the Markit/CIPS purchasing managers' index for the manufacturing sector unexpectedly rose to a 10-month high in August, rebounding far more decisively than expected after a slump in July.

The pound rose in the wake of the data and was recently up 0.85% against the dollar at $1.3250. The yield on the 10-year U.K. government bond was up 5 basis points at 0.69%.

The Dax was recently up 0.52% at 10,647.70 and the Cac 40 climbed 1.06% to 4,485.10.

Home builders led by Taylor Wimpey (TWODF) and Berkeley Group led the gainers in London, and banks, including Lloyds Banking Group (LYG) , also rose, galvanized by the prospect of the Bank of England standing pat on record low rates rather than cutting them further, as it hinted on Aug. 4 it may do. 

Capital Economics' U.K. economist Paul Hollingsworth said evidence from the Markit/CIPS index, which rose to 53.3 from 48.3, "supports our view that the economy is set for a period of slower growth, rather than a full-blown recession in the near term."

On mainland Europe banks, including Deutsche Bank (DB) , and Commerzbank (CRZBY) also rose, after Deutsche CEO John Cryan's calls yesterday for banking mergers and news that his bank had earlier this month contemplated - but dismissed - a merger with Commerzbank.

S&P 500 mini futures were recently up 0.18% and Dow Jones futures were up 0.21%.

Oil prices, which had recovered earlier in the day, slipped lower, with West Texas intermediate down 0.09% at $44.66 a barrel.

French spirits maker Pernod Ricard (PDRDF) was recently up 2.2% after reiterating a medium-term sales growth target and noting that Americas growth had doubled in the fiscal year ended June, when its profit met expectations.

Recruitment consultancy Hays reversed initial gains in London to trade down 2.4% after beating first-half earnings expectations.

In Stockholm radiation therapy equipment maker Elekta (EKTAY) was up about 3% after reporting a halving of its first-half net loss and a 16% rise in sales.

Markit said its manufacturing purchasing managers' indices for the eurozone fell to 51.7 from 52.0, below its earlier "flash" estimate for a reading of 51.8.

That put the index at a three-month low and sent the euro down against the pound.

"Germany and the Netherlands record strongest rates of expansion, the French downturn continues and Italy slips into contraction," Markit said.

Markit's index for the Italian manufacturing sector came in below expectations to enter sub-50 contraction territory. It fell to 49.8, down from 51.2. The French index also lagged an initial forecast, falling to 48.3 from 48.6 but the German index came in as expected at 53.6.