European stocks suffer as China outlook continues to worsen 

More than £30bn was wiped off FTSE 100-listed stocks this morning, after new economic data from China reduced hopes of a recovery from last week’s market turmoil.

The FTSE dipped below 6,100 points in mid-morning trading, 2.4 per cent lower, while Germany’s Dax and France’s Cac have had a similarly bad morning, falling 2.8 per cent and 2.7 per cent respectively.

This morning, China released disappointing manufacturing data for August, exacerbating fears a slowdown in the world’s second largest economy could spill over into other markets.

The official purchasing manager’s index (PMI) was 49.7 last month – down from 50 in July. Separately, the Caixin/Markit PMI, which measures private companies, put the figure at an even lower level of 47.3, its weakest since 2009.

Asian stock markets reacted badly to the news, with the Shanghai Composite closing 1.23 per cent lower, and the Shenzen stock exchange dropping 4.61 per cent.

At the end of last week, it seemed US and European markets pairing losses after Monday’s shock 8.5 per cent fall in Chinese stocks. An interest rate cut by the country’s central bank, combined with an indication from the Fed that US rates may not be raised in September, gave investors hope work was being done to stabilise the key economies.

On Thursday, the FTSE 100 closed 3.6 per cent higher, followed by a 0.9 per cent rise on Friday. In the US, similar gains were made on the Nasdaq and S&P 500.

Naeem Aslam, chief market analyst at Ava Trade, commented:

“The manufacturing PMI data is the measure of large state owned firm and the reading not only fell short of expectations, but it also dipped into a negative territory and this makes the headline which traders certainly do not like at all.
The slump is also seen in the small and medium size business and this paints a very disappointing picture which reflects that both big and small firms are craving for growth. If both small and large size firms are struggling, then where are we going to see any sign of growth?”

Source: CityAM – European stocks suffer as China outlook continues to worsen

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