Chinese data nudges world stocks down as Asian health is mulled

London — European equity markets nudged down on Tuesday as weak Chinese business surveys dampened appetite for risk, while investors braced for a spate of data on the region’s economic health.

Bourses in Britain, France and Germany followed Asian peers into the red after the surveys on China manufacturing missed forecasts — another sign that Beijing’s efforts to spur growth in the world’s second biggest economy had yet to bear fruit.

Both official and private business surveys suggested slower Chinese factory growth this month, dashing hopes for a steady reading or even a faster expansion. Data also showed a slower expansion in its services sector.

Those figures underscored questions over prospects for the Chinese economy, with investors across the world already on edge over growing signs of a two-speed global economy where a robust US outpaces its peers.

The Euro Stoxx 600 was off 0.2%, with British shares down 0.2% and bourses in Germany and France down 0.1% and 0.4%, respectively. 

All eyes were on eurozone GDP figures, due at 9am GMT, and data on German CPI, due at 12pm GMT. Inflation remains a key issue for eurozone policy makers, said Michael Hewson, chief market analyst at CMC Markets

“Unemployment is down, wages are starting to edge higher but inflation remains very subdued,” he said. “That is the biggest problem for the European Central Bank (ECB) in terms of its policy response in trying to lift demand in the euro area.”

Forecasts for the eurozone are for a 0.3% rise in GDP from the previous quarter. Earlier, France reported steady growth for the first quarter, while Spain’s economy also grew faster than expected. Ahead of the eurozone data, corporate earnings were the major factor.

Chip maker AMS jumped 16% after beating forecasts for first-quarter profit. AMS is a supplier to Apple, which is due to report its results later.

Banks dragged heavily on the Stoxx 600. Danske Bank, hit by money-laundering scandals, fell more than 6% after lowering its outlook for 2019, while number one eurozone bank Santander also slipped after first-quarter net profit.

In contrast, Standard Chartered climbed after unveiling plans for share buybacks of up to $1bn, its first in at least 20 years.

Asian markets fell after the Chinese data amid thin trading. MSCI’s broadest gauge of Asia-Pacific shares outside Japan was off 0.5%. Bourses in South Korea and Hong Kong both fell.  Japan’s financial markets are closed throughout the week as Japanese Emperor Akihito prepares to abdicate in favour of his elder son, Crown Prince Naruhito.

MSCI’s world equity index, which tracks shares in 47 countries, was flat. S&P futures were marginally in the red in early trading.

Yen climbs 

In currency markets, the weak Chinese data fueled some gains in Japan’s yen, which rallied to a three-week high amid the country’s holiday-thinned trading. But forex traders were focused on whether European data would push currencies out of recent trading ranges.

Even marginal growth could squeeze speculators who have been amassing large short positions in the euro, worth a net $14.8bn in the week to April 23.

Should the eurozone data suggest weakness, said Commerzbank forex strategist Thu Lan Nguyen, markets may start to dial back even further predictions of an increase in interest rates by the ECB next year. “If the data disappoints, there is scope for markets to push back rate hike expectations even further,” she said. “This will tell us on whether the ECB will get into the dilemma of being more expansionary.”

Against a basket of currencies the dollar was down 0.1% at 97.845.

The US Federal Reserve’s two-day policy meeting, which ends on Wednesday, was in focus. The Fed is expected to leave interest rates unchanged as it seeks to balance robust economic growth against low inflation.

In commodity markets, oil prices reversed losses after Saudi Arabia said a deal between producers to withhold output, in place since January, could be extended beyond June to cover all of 2019. Brent crude futures were last at $71.25 a barrel, down 0.4%.

Reuters