The Eurozone economy's November composite PMI (flash) ticked up to 54.4 from 53.9, to a four and half year high. Both manufacturing and service PMIs stayed in the expansionary above-50 region. This takes Oct-Nov manufacturing PMI to 52.5 from 1Q-3Q's 52.0, with services at 54.4 (vs 1Q-3Q 's 53.9). 4Q growth is thereby seen on a firmer footing, where domestic demand will do much of the heavy-lifting for growth prospects while exports face global headwinds despite a weak euro. 

The PMI breakdown meanwhile pointed to broad improvement in most subindices, including order books, employment prospects and lower backlogs. However price pressures remain subdued with output prices softening further, as manufacturers' prefer to maintain volumes despite lower margins. At the regional level, activity in France slipped, while Germany's new business orders rose to a three-month high. Recent terror attacks in Paris might also temporarily dent confidence indices in the Nov/ Dec readings. 

These strong PMIs are unlikely to dissuade the European Central Bank's (ECB) from considering additional stimulus on 3 Dec. While data continues to improve at the margin, policymakers are concerned that existing economic slack and weak supply-side pressures will keep inflation far from the 2% target for longer than anticipated. Next set of staff projections are also due next week, which might see a further adjustment in growth and inflation projections. 

Not everyone in ECB is however on the same page. ECB's Executive board member Sabine Lautenschlaeger disagreed with the need for further QE. She stressed that further asset purchases only helped to buy time, while structural support was needed to materially narrow the output gap and excess capacity. These remarks add to German's broader mistrust on additional QE purchases. 

Despite the dissenting voices, the likelihood of further stimulus at the Dec meeting remains high. The debate now is focused what steps are likely, which could include a 10-20bp cut in the deposit facility rate (current -0.2%) or extend QE by another 3-6months beyond Sep16. Money market/ EONIA rates have already slipped further into negative, pricing in the likelihood of further rate/QE action.