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European stocks followed lower in Asia on Monday after weak data raised concerns about the health of the Chinese economy, while traders waited for corporate earnings to gauge the impact of higher global interest rates.
The Stoxx 600 index fell at the level of the European region by 0.6 percent, extending the losses of the previous session, while the French CAC 40 index lost 1.2 percent and the German DAX index lost 0.5 percent.
Indexes pulled back on declines in the luxury goods sector, after data from China indicated the world’s second-largest economy had struggled to recover after three years of severe Covid-19 restrictions. Switzerland’s Richemont led the decliners, falling 9 percent.
According to official data released on Monday, China’s gross domestic product expanded 0.8 percent in the three months through July, down from 2.2 percent in the previous quarter, as slumping exports, weak retail sales and a dying real estate sector weighed on growth.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, noted that the country’s post-pandemic recovery is “losing momentum after the initial release of pent-up demand built during the zero-Covid policy era, while exports decline amid slumping global demand.”
The disappointing data affected oil prices, as Brent crude, the international benchmark, fell 1.3 percent to trade at $78.88 a barrel, while the US West Texas Intermediate index fell by the same margin to $74.46. China is the second largest oil consumer in the world after the United States.
Investors’ focus turns to the upcoming meeting of China’s ruling Politburo later in the month, when policymakers are expected to consider further potential support for the economy.
“Today’s data raises the prospects of further stimulus measures from China over the coming weeks,” said Mohit Kumar, chief European financial economist at Jefferies.
“Given that market expectations have already been lowered on China’s growth story, we may get some bullish surprises from stimulus measures, which could support stock markets in the short term,” he noted.
China’s benchmark CSI 300 index fell 0.8 percent on Monday, while Hong Kong’s stock exchange suspended trading due to a weather warning. Japanese markets are closed for a holiday.
Meanwhile, traders braced for the New York Fed’s release of the Empire State Manufacturing Survey later in the day, in which the index is expected to come in at -4.3 in July, down from 6.6 the previous month.
A negative reading means that the majority of respondents reported an overall contraction in factory activity, as the sector faltered after a prolonged period of high US interest rates.
US futures were weak, with those tracking the Wall Street benchmark S&P 500 losing 0.1 percent, while those tracking the tech-heavy Nasdaq 100 were flat ahead of the New York open.
With earnings season approaching, traders are turning their attention to tech companies this week; On Wednesday, electric car maker Tesla became the first of the giant companies in the sector to announce its results.