(Bloomberg) — The euro slumped and German yields fell as weaker-than-expected data fueled concern the region’s economic recovery has hit a wall, spurring wagers on more aggressive rate cuts from the European Central Bank.

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The common currency weakened 0.7% against the dollar, heading for its steepest daily decline since June. The gap between French and German benchmark yields climbed to the highest level since early August.

European stocks fluctuated, with so-called defensive plays in the food, telecoms, real estate and utilities sectors faring best. US futures pointed to a flat open on Wall Street with indexes hovering near record highs after the Federal Reserve’s jumbo rate cut last week.

Investors are increasingly wary of European assets as the region’s manufacturing downturn deepens and political turmoil in France continues. Weak PMI data for France and Germany on Monday was followed by numbers that showed the euro-area’s private-sector economy shrank for the first time since March.

“The market is almost demanding a more aggressive rate cut, especially after what we have seen the Fed has done,” Marija Veitmane, senior multi-asset strategist at State Street, said on Bloomberg TV. The ECB “is definitely behind the curve,” she said.

Investors will be watching for speeches from Fed officials on Monday for fresh insight on the pace and scope of easing. Further out, the Fed’s preferred price metric and data on US personal spending will be in focus on Friday.

In Europe, the composite Purchasing Managers’ Index by S&P Global dropped to 48.9 in September from 51 the previous month — below the 50 threshold separating growth from contraction. Analysts had expected the measure to slip only marginally, to 50.5.

The widening yield gap between France and Germany shows investors remain on edge over France’s political and fiscal challenges. French Prime Minister Michel Barnier said his new government could increase taxes for big business and the wealthiest as it seeks to repair runaway budget deficits.

The spread, a proxy for French risk, climbed to 80 basis points, the widest since Aug. 5. It’s been trading significantly wider since President Emmanuel Macron called a surprise election in June, spooking investors over the country’s ability to bring its large deficit under control long-term.

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Elsewhere, Asian markets were lifted by speculation China is close to announcing fresh stimulus, after a cut to a short-term policy rate and a rare economic briefing scheduled for Tuesday.

“The start of the Fed easing cycle should lead to more stimulus from China, particularly as the 5% growth target seems difficult to achieve,” Mohit Kumar, chief strategist and economist for Europe at Jefferies International Ltd., wrote in a note. The “stimulus measures should also be beneficial for Europe.”

Gold touched a record high earlier before paring the move, as the worsening strife in the Middle East fueled wagers on further price gains in the metal due to its haven status.

Key events this week:

• UK S&P Global Manufacturing PMI, S&P Global Services PMI, Monday

• Australia rate decision, Tuesday

• Japan Jibun Bank Manufacturing PMI, Services PMI, Tuesday

• Mexico CPI, Tuesday

• Bank of Canada Governor Tiff Macklem speaks, Tuesday

• Australia CPI, Wednesday

• China medium-term lending facility rate, Wednesday

• Sweden rate decision, Wednesday

• Switzerland rate decision, Thursday

• ECB President Christine Lagarde speaks, Thursday

• US jobless claims, durable goods, revised GDP, Thursday

• Fed Chair Jerome Powell gives pre-recorded remarks to the 10th annual US Treasury Market Conference, Thursday

• Mexico rate decision, Thursday

• Japan Tokyo CPI, Friday

• China industrial profits, Friday

• Eurozone consumer confidence, Friday

• US PCE, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.1% as of 10:14 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures rose 0.1%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 0.2%

• The MSCI Emerging Markets Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.6% to $1.1100

• The Japanese yen was little changed at 143.71 per dollar

• The offshore yuan fell 0.3% to 7.0609 per dollar

• The British pound fell 0.3% to $1.3283

Cryptocurrencies

• Bitcoin rose 0.5% to $63,513.33

• Ether rose 2.9% to $2,648.52

Bonds

• The yield on 10-year Treasuries was little changed at 3.74%

• Germany’s 10-year yield declined five basis points to 2.16%

• Britain’s 10-year yield was little changed at 3.90%

Commodities

• Brent crude fell 0.1% to $74.39 a barrel

• Spot gold fell 0.2% to $2,616.83 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley.

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