The euro and German bond yields fell on Friday as data showed business activity contracted in the euro zone's two biggest economies in July, adding to fears of a pending recession.

French manufacturing activity contracted and growth in the services sector slowed in July, while both manufacturing and services activity contracted in Germany, the bloc's lead economy, preliminary purchasing managers' surveys showed.

The euro fell almost 1% to $1.0131, having traded at $1.0209 before the release of the French figures.

Germany's 10-year bond yield, the benchmark for the euro area, fell over 13 basis points to 1.09%.

The two-year yield, sensitive to interest rate expectations, dropped 16 bps to 0.49% as markets reduced their bets on European Central Bank rate hikes this year slightly.

The pan-European STOXX 600 index was little changed, flat on the day. Paris-listed blue chips edged 0.2% lower. German shares extended declines and were last down 0.4% on the day.

(Reporting by Yoruk Bahceli, Samuel Indyk, Joice Alves; Editing by Dhara Ranasinghe)