By Scott Kanowsky

Investing.com -- European stock markets edged slightly higher in thin holiday-hit trading after shares in the region slumped to their worst yearly performance since 2018 last year.

At 03:08 EST (08:08 GMT), the DAX in Germany was 0.53% higher, France's CAC 40 climbed 0.78%, and the pan-European Euro Stoxx 50 rose 0.96%. A number of stock markets around the world are closed on Monday in observance of New Year's Day celebrations, including in the U.K., Switzerland, and the U.S.

Stocks in Europe enter 2023 with a degree of cautious optimism following a difficult trading year that was impacted by soaring inflation, aggressive central bank interest rate hikes, and a surge in geopolitical tensions. However, economic data in the last week of 2022 has fuelled hopes that an expected recession in the region may not be as severe as once feared.

Investors will have more data to digest out of the continent this morning, with Spain, Italy, Switzerland, France, Germany, and the broader Eurozone all due to unveil their latest purchasing managers' index for the manufacturing sector.

The numbers come after data over the weekend showed that factory activity in China sunk for the third straight month in December and at the steepest pace in almost three years. The world's second-largest economy is reeling from a fresh wave of COVID-19 cases sweeping across the country following the sudden relaxation of strict pandemic restrictions.

China's official PMI dropped to 47.0 from 48.0 in the prior month, according to the National Bureau of Statistics on Saturday, below economists' forecasts of 48.0 and the largest drop since February 2020. It was also under the 50-point level indicating contraction.

The economic calendar will become busier over the course of the week, highlighted by the release of the U.S. ISM manufacturing PMI report and minutes from the FOMC's December meeting on Wednesday. The Eurozone's flash consumer price index will come out on Friday as well before attention turns to the latest U.S. jobs report.

In corporate news, shares in Atos SE (EPA:ATOS) gained nearly 10% on a media report that European airplane maker Airbus Group SE (EPA:AIR) is in early talks with the French information technology company over taking a minority stake in its Evidian cybersecurity unit.

Additionally, the euro moved lower against the dollar by 0.25% to $1.0675.

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