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Wednesday, May 25, 2022

European stock markets ruffled by China

European stocks fell Friday as poor data out of China sent a chill through markets about the prospects of a global economic recovery.

London’s benchmark FTSE 100 index of top companies shed 1.13 percent to end the day at 6,579.81 points, the CAC 40 in Paris retreated 0.58 percent to 5,057.36 points, and Frankfurt’s DAX 30 fell 1.43 percent to 11,347.45 points.

In foreign exchange, the euro slipped to $ 1.0967 from $ 1.0985 late in New York on Thursday.

“European markets were under pressure on Friday after manufacturing data in China, France and Germany dented hopes of a recovery in global growth,” said CMC Markets UK analyst Jasper Lawler.

A key gauge of Chinese manufacturing activity tumbled to a 15-month low in July, throwing a pall over growth in the world’s second-largest economy.

That hit prices of many commodities which are used in manufacturing.

“The issue of falling commodities has replaced Greece and Chinese equity volatility as the centrepiece of the capital markets,” said Chris Weston, chief market strategist at traders IG (LSE: IGG.L – news) .

The Chinese data also weighed on the mining sector but this was offset by news of heavy job cuts from Anglo American (LSE: AAL.L – news) , with investors cheering the cost cutting measures.

Anglo American reported heavy first half losses and announced staff numbers would drop by 6,000, with the global mining firm hit by the weakness of iron ore prices.

Its shares rose had risen over two percent at one point in the day, but they finished with a loss of 3.52 percent to 778 pence.

Shares (Frankfurt: DI6.F – news) in Lonmin (LSE: LMI.L – news) tanked over 17 percent to 62.35 pence after the world’s third- largest platinum producer said it was set to cut 6,000 jobs in South Africa owing to falling prices and high costs, dealing another blow to the country’s fragile economy.

Shares in other miners were hit: copper specialist Antofagasta (Other OTC: ANFGF – news) fell 6.3 percent to 589 pence, while diversified companies Glencore (Xetra: A1JAGV – news) dropped 4.5 percent to 210.15 pence and BHP Billiton (NYSE: BBL – news) shed 3.8 percent to 1,123 pence and BHP Billiton lost 3.5 percent to 2,400.5 pence.

Shares in Air France-KLM (Other OTC: AFLYY – news) caught an updraft, rising 0.59 percent to 6.63 euros, after it announced it would add a further 300 million euros to a previously announced 1.5-billion-euro cost-cutting programme as it revealed first-half losses of 619 million euros.

– Greek relief rally over –

Meanwhile a survey by Markit (NasdaqGS: MRKT – news) found that private sector business activity in the eurozone had dipped in July, but was still expanding, which many analysts showed it was holding up against the Greek crisis.

Nevertheless, the eurozone is set for only modest growth at best, with the Greece crisis not yet fully resolved.

On Friday, the so-called “troika” of Greek creditors — the International Monetary Fund, European Union and European Central Bank — had been set to arrive in Athens to begin negotiating the complex and contested details of a third bailout to Greece worth up to 86 billion euros.

However that was delayed for several days, due to logistical problems according to a source.

For all intents and purposes “the Greek relief rally in markets has run its course. The market is sceptical of the sustainability of any bailout without a major debt haircut,” said Lawler.

European markets rallied after the outlines of the bailout was agreed on July 13 and the Greek parliament has supported the major tax hikes and spending cuts that must be made.

Soaring Amazon shares after a surprise profit report failed to lift US stocks.

In midday trading the Dow Jones Industrial Average had shed percent to 17,637.55 points, while the broad-based S&P 500 gave up 0.47 percent to 2,092.33. The tech-rich Nasdaq Composite Index slid 0.22 percent at 5,134.92 points.

Amazon shares jumped 15.2 percent to $ 555.32 on the online retail giant’s unexpected swing into profit in the second quarter.

Asian shares mostly fell on the disappointing Chinese data and the strong US dollar.

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