By Yoruk Bahceli
LONDON, Oct 24 (Reuters) - Euro zone bond yields held steady on Thursday as market attention shifts away from Brexit to the region's economic performance, with manufacturing and services data due ahead of the European Central Bank's last policy meeting under Mario Draghi's leadership.
Flash manufacturing and services PMI numbers are due for Germany, France and the euro zone on Thursday morning.
Figures for Germany will be in particular focus, after last month's data showed private sector activity shrank for the first time in 6-1/2 years, with the services sector, which had so far been immune to the contraction in manufacturing, showing its weakest performance in three years.
Reuters polls show slight improvements are expected across all releases.
"Market expectations are for a stabilization or even tentative signs of recovery, which leaves some potential for disappointment if Australian and Japanese data are any guide," UniCredit analysts said in a client note.
Australian numbers were just off a contraction, while Japan's factory activity shrank at the quickest pace since 2016.
Most euro zone bond yields were unchanged in early trading.
Germany's 10-year government bond yield held steady at -0.40%, off a near three-month high of -0.33% reached earlier in the week on Brexit optimism, which has faded since.
EU member states on Wednesday delayed a decision on whether to grant Britain a three-month Brexit extension, while Prime Minister Boris Johnson said if the deadline is deferred to the end of January he would call an election by Christmas.
Later on Thursday traders will turn their attention to the ECB's last press conference under the leadership of Draghi, although no significant announcements are expected.
It's "difficult to expect much given how much dissent there has been," said UBS strategist Lefteris Farmakis.
An unprecedented split, which saw more than a third of policymakers including the central bank chiefs of France and Germany oppose the new bond purchases the bank announced in September, threatens the effectiveness of ECB monetary policy.
Focus will also be on whether the central bank provides any detail on the composition of its asset purchases, which restart in November.
It may reiterate on Thursday that the scheme is likely to be broadly in line with the previous round, in which government bonds made up the bulk of purchases.
"We don't think they're going to give away much at this one," said Rabobank fixed income strategist Lyn-Graham Taylor.
Instead he said they were waiting for "what economic predictions are like in December".
While money markets price practically no chance of a rate cut in December ECBWATCH, Taylor said Rabobank analysts expect economic data to deteriorate enough to justify a rate cut in December.
(Reporting by Yoruk Bahceli Editing by Shri Navaratnam)
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