European stocks extend losses, Asia down
LONDON: European stock markets fell for a second day running yesterday as more weak Chinese data added to concerns about a looming US rate hike. China’s consumer price index reading-the weakest since May-comes days after Beijing data showed a sharp fall in imports and exports, adding to worries about the growth slowdown in the world’s second largest economy.
Officials said prices rose 1.3 percent last month, down from 1.6 percent year-on-year in September.
“A key feature of global economic developments since the 2007 crisis has been the absence of inflation in the major economies,” VTB Capital economist Neil MacKinnon said yesterday.
“This reflects a number of factors, but can mostly be attributed to weak global demand and excess supply.” In late morning deals, London’s benchmark FTSE 100 index fell 0.3 percent, Frankfurt’s DAX 30 lost 0.4 percent and the CAC 40 in Paris shed 0.3 percent compared with Monday’s close. Traders are meanwhile betting on the US central bank tightening monetary policy in December despite broad weakness across the global economy. “If the Fed is going for a rate hike in December many investors will now be cautious about buying into equities,” ADS Securities market strategist Nour Al-Hammoury.
“Yesterday, European and US markets reacted to the increase chance of the hike, all falling by around 1.0 percent.” Increased prospects of a US rate hike, following much better-thanexpected US jobs data on Friday, has meanwhile boosted the dollar’s attractiveness that saw it reach six-month highs against the euro on Friday. In the euro-zone’s second biggest economy France, economy minister said his country’s economy is “lackluster” and will probably remain so in 2016.
“There is a worldwide demand problem today and there is only a single engine left running”, the US economy, Emmanuel Macron told Europe 1 radio.
“Any good news will not come from abroad,” he said. Macron said France needed to accelerate economic reforms and he called for a “much stronger investment policy in Europe” to rekindle growth on the continent. On the corporate front yesterday, shares in Vodafone rose 4.7 percent to 224.60 pence in London after the British mobile phone giant announced a rise in quarterly revenues, boosting the company’s fortunes as its rivals prepare for mega tie-ups.
A further slowdown in Chinese inflation compounded worries about the world’s number-two economy yesterday, adding to selling pressure in Asian markets and extending a global retreat as talk of a December US interest rate hike increases.
The below-forecast reading on China’s consumer price index-the weakest since May-comes days after Beijing data showed a sharp fall in imports and exports, and is the latest in a string of reports pointing to a growth slowdown in the country.
Officials said prices rose 1.3 percent last month, down from 1.6 percent year-on-year in September. Also, the producer price index, a measure of factory gate prices, fell 5.9 percent-matching the previous two months and marking a six-year low.
The news will add to pressure on Beijing as it struggles to transform the nation’s growth model to a more stable one driven by domestic consumption and away from decades of export reliance and state investment. Liu Li-Gang, the chief Greater China economist at Australia & New Zealand Banking Group in Hong Kong, said the latest data “requires the (People’s Bank of China) to engage in more aggressive policy easing”.
It also brought an end to a five-day rally in Shanghai, which had been boosted Monday by news that authorities will resume initial public offerings this month after a four-month hiatus caused by the summer stock rout.
The market ended 0.2 percent downalthough it pared early hefty losses and Hong Kong dropped 1.4 percent, while Sydney, where several firms that rely on Chinese trade are listed, closed 0.4 percent lower. However, there was some respite for emerging market currencies, which edged up slightly after being hammered Monday by last week’s better-than-expected US jobs data that ramped up expectations of a Fed rate rise next month. — Agencies