European stocks were flat on Monday, as weak data from China damped sentiment while investors waited for the latest eurozone inflation and economic growth data, to gauge whether the region’s interest rates would rise further.
Europe’s region-wide Stoxx 600 was little changed shortly after the market open, while France’s Cac 40 was up 0.1 per cent and Germany’s Dax was flat.
The subdued moves came after fresh data showed China’s service sector activity missed expectations in July, and manufacturing weakened, signs that the world’s second-largest economy is struggling to regain momentum after three years of severe Covid-19 restrictions.
China’s manufacturing purchasing managers’ index came in at 49.3 on Monday, marginally above consensus expectations of 49.2. The non-manufacturing PMI, which includes sectors such as construction and agriculture, was 51.5, marking its lowest level this year.
A reading below the neutral 50 mark means the majority of survey respondents indicated an overall contraction in the sector, while a reading above 50 signals an expansion.
European consumer non-cyclicals stock led declines in the region, down 0.9 per cent, as investors’ concern grew that an economic slowdown in China would threaten global demand.
Hong Kong’s Hang Seng index gained 1.1 per cent, while the benchmark CSI 300 rose 0.6 per cent, as China-focused investors hoped that the government would soon step in to bolster the stalled economy.
“There is encouraging stimulus talk though, hence the equity rally [in Asia] this morning”, said Jim Reid, research strategist at Deutsche Bank.
Meanwhile, markets awaited the latest figures on eurozone inflation and gross domestic product on Monday, hoping to gain further insight into the European Central Bank’s next policy move.
The annual rate of price growth in the single currency zone is expected to have slowed from 5.5 per cent in June to 5.3 per cent in July, its lowest level since the start of last year, according to a Reuters poll of economists.
The economists also predict growth of 0.1 per cent in the three months to June compared with the same period last year.
The data comes after the central bank’s policymakers last week lifted the region’s benchmark deposit rate to 3.75 per cent, its highest level since 2001, but dropped the usual guidance that borrowing costs would keep rising.
ECB president Christine Lagarde confirmed the central bank’s ninth successive rate rise could have been the last, noting that her stance on further tightening in September was a “decisive maybe”, in a move away from the hawkish language she used in past meetings.
“The bar for a September hike has gone up and if inflation data continues to move lower, ECB could be already done with its rate-hiking cycle”, said Mohit Kumar, chief Europe financial economist at Jefferies.
The eurozone’s second-quarter growth rate, also coming out on Monday, is expected to have accelerated to 0.2 per cent after stagnating in the previous quarter.
In the US, futures contracts tracking Wall Street’s benchmark S&P 500 lost 0.1 per cent, while those tracking the tech-focused Nasdaq 100 declined 0.2 per cent ahead of the New York open.