A preliminary estimate of the Purchasing Managers’ Index of research firm Markit showed a drop to 51.4 from 52.1 in October. That’s a 16-month low, and a sharp disappointment for financial markets, which had expected the index to rise to 52.3. Although the sub-index for manufacturing output rose to its highest in four months, that was outweighed by the services sub-index falling to its lowest level this year. Sales prices and order backlogs also fell.

Any index level above 50 typically reflects growth, but hard data from the region suggest that the expansion is painfully weak, and far from robust enough to create jobs and reduce chronically high–and growing–debt levels. Last week, Eurostat said the economy grew 0.2% in the third quarter, after an even more modest 0.1% in the spring. Markit’s chief economist Chris Williamson said the figure for the fourth quarter was likely to similarly underwhelming.

German and French stocks fell sharply on the news, after both countries’ PMIs missed expectations, while the Italian benchmark index fell even more after the gloom was reinforced by separate figures showing a worse-than-expected 1.5% drop in new orders in September.

By mid-morning, the EuroStoxx 600 was down 0.6%, while the Italian FTSE MIB index was down 1.5%. The euro meanwhile, lost half a cent against the dollar before recovering to $1.2530 by 0600 ET.

In recent weeks, markets have coped better with bad economic data, betting that it increased the likelihood of more stimulus from the European Central Bank.

However, despite claims of unanimity from President Mario Draghi, the bank’s top echelons appear deeply divided over how much more it can do before bumping into legal and political barriers, especially in Germany, whose top court has said it already thinks the E.C.B. has exceeded its authority by promising to buy government bonds in an emergency.

German central bank head Jens Weidmann said earlier this week that purchases of government bonds, a key plank of reflationary policies in the U.S., Japan and the U.K., would only encourage countries to put off necessary structural reforms, and probably wouldn’t have the effect that they have had elsewhere.

There was a moderate degree of comforting news from the U.K., which has also showed signs of slowing in recent weeks under the weight of its sluggish neighbor. New figures showed core retail sales up 0.8% on the month and 4.6% on the year in October, well ahead of expectations, while the Confederation of British Industry’s monthly survey showed a surprise increase in new orders.

“Manufacturers are particularly struggling in export markets due to a challenging global economic climate, including sluggish Eurozone growth, and also slowing emerging markets, such as China,” C.B.I. director of economics Rain Newton-Smith said.