The FTSE 100 is up 0.8pc to 5618, France's CAC has gained 1.4pc to 3240 and Germany's DAX is up 1.2pc to 6494.
David Jones, chief market strategist at IG Index, said:
10.17 Across the eurozone, joblessness rose to 11.1pc in May, meaning that around 17.56m people were out of work. The figure was pushed higher by lay-offs in Austria, France and Spain.
10.04 While manufacturing is weakening across the eurozone, the UK has some slightly healthier figures. The PMI rose to 48.6 last month from May's three-year low of 45.9, beating expectations for a more modest climb to 46.5.
But, the survey still spent its second month below the 50 mark that divides growth from contraction.
09.59 Stern words from France's state auditor. He has told the new Socialist government that France will have to find €6-10bn this year and €33bn next year to meet its European deficit targets or risk unnerving the markets. The report said:
Reuters points out that the figures leave French president, Francois Hollande, with the tricky task of explaining to voters, seven weeks after he took office promising an end to austerity, that sweeping cost cuts will be inevitable after all.
09.53 Another look at the Italian data shows that youth unemployment has climbed to 36.2pc, its highest since 1992. The overall employment rate for 15 to 64-year-olds stood at 57.1pc.
09.44 Today's data shows that factories across the eurozone were hit hard in June. Markit's Eurozone PMI was unchanged at 45.1 in June, above the preliminary reading of 44.8 and holding at its lowest reading since June 2009.
The survey's employment index fell to 46.7 in June, its lowest since January 2010, from 47.1 in the previous month, signalling accelerating job cuts.
Chris Williamson, chief economist at data provider Markit, said:
The PMI suggests that the goods-producing sector contracted by around 1 percent in the second quarter, with this steep rate of decline looking set to accelerate further as we move into the second half of the year.
09.23 Bad news from Germany, though, where the manufacturing sector shrank at its fastest pace in three years in June. The PMI slipped to 45 from 45.2. Europe's economic powerhouse has remained resilient through much of the crisis, but recent data suggests it may be running out of steam.
09.13 But in France, the slump in manufacturing activity eased as the flow of new orders improved. The Markit/CDAF final purchasing managers' index for the sector rose to 45.2 in June from 44.7 in May. But, the second quarter is still set to be the sector's worst in three years.
09.04 More manufacturing data. Greece's slump worsened in June, with the purchasing managers' index dropping to 40.1 points from 43.1 in May. The slide came as uncertainty ahead of the general election weighed on business activity, leading to sharp drops in production and employment.
Backlogs of work were down sharply in June with manufacturing firms reducing staffinf levels for a 15th month in a row.
08.53 Greece should not lose time trying to renegotiate its international bailout but focus instead on getting its reform programme on track, European Central Bank policymaker Joerg Asmussen has said this morning, adding that it was risky to delay adjustments.
Reuters reports that Mr Asmussen said in a speech today:
There is no silver bullet. Those who advocate 'once and for all solutions' - be that a banking licence for the ESM, a European transfer system, or the like - are contenting themselves with a superficial analysis.
08.15 Markets are somewhat muted this morning as they digest the weak Chinese manufacturing figures and await economic data from the eurozone.
Figures this morning show that Spain's manufacturing activity contracted at its fastest rate in over three years in June as output fell again in the face of weak internal demand and sliding exports. The Purchasing Managers' Index for the manufacturing sector fell to 41.1 in June from 42 in May.
Italian manufacturing output contracted for the 11th month running in June.
We're also expecting manufacturing data from France and Germany.
07.52 Figures out yesterday revealed that China's manufacturing activity expanded at its weakest pace for seven months in June, despite government attempts to arrest the slowdown. The data raise fresh fears about the country’s ability to power the global economy.
The country’s Purchasing Managers’ Index fell to 50.2 last month, from 50.4 in May, according to China Federation of Logistics and Purchasing.
07.48 The Bank of England is preparing to unleash a £200bn stimulus package for the economy by printing more money this week and relaxing financial regulations.
Details in the Bank’s Financial Stability Report (FSR), released last week, showed that the decision to let banks tap reserves of cash and liquid assets could provide as much as £150bn for new lending – a sum equivalent to the entire stock of loans to UK small and medium-sized businesses.
Rate-setters on the Bank’s Monetary Policy Committee are also expected this week to unveil a further £50bn of quantitative easing (QE). Last month, the Governor Sir Mervyn King voted to increase the £325bn of completed QE by £50bn. He was narrowly outvoted, with the committee split 5-4 in favour of leaving policy unchanged.
07.45 Bad debts in the eurozone are a “ticking time bomb” for the continent’s economy, with the worst effects expected to be felt next year, a report has warned.
Banks’ balance sheets will contract by a record margin in 2012, further constraining the supply of credit to businesses and consumers, according to Ernst & Young, but the “real impact” of Europe’s debt crisis will not arrive until 2013.
07.30 Good morning and welcome back to our live coverage of the European debt crisis.
