European stock markets faced a downturn on Thursday, influenced by fresh signals of slowing economic growth, both domestically and in China, along with concerns about potential Federal Reserve policy tightening.
As of 03:15 ET (07:15 GMT), Germany’s DAX index traded 0.3% lower, the UK’s FTSE 100 declined by 0.3%, and France’s CAC 40 dropped 0.1%.
German Industrial Production Declines Sharply
German industrial production exhibited a more significant decline than expected in July, falling by 0.8% month-on-month, exceeding the anticipated 0.5% drop. This contraction followed a revised 1.4% decline in the previous month. These numbers underscore the challenges faced by the Eurozone’s largest economy, a pivotal driver of regional growth, raising concerns about a potential slide back into recession.
Later in the session, the latest estimate for Eurozone growth in the second quarter was set to be released, with expectations for a meager 0.3% growth quarter-on-quarter and a 0.6% annual increase.
Global Economic Woes Extend to China
The economic challenges were not limited to Europe. Recent data from China revealed a drop in both exports and imports for August. Exports plummeted by 8.8% year-on-year, and imports contracted by 7.3%. While these figures exceeded expectations, they indicate that China’s manufacturing sector remains under substantial pressure. Policymakers are now faced with the imperative task of boosting domestic demand to support overall economic growth. The ongoing struggles in China, a significant market for Europe’s largest companies, continue to impact their financial performance.
U.S. Inflation Concerns Emerge
On the other side of the Atlantic, concerns over persistent inflation resurfaced after stronger-than-expected U.S. service sector data were released on Wednesday. Previously, investors had grown accustomed to the notion that inflation was receding in the U.S., allowing the Federal Reserve to halt its rate-hiking cycle and preventing a significant economic slowdown. Several Federal Reserve officials were scheduled to speak later on Thursday at a fintech conference hosted by the Philly Fed, just before entering the blackout period ahead of their meeting later this month.
Nestle Expands into Brazilian Chocolate Market
Within the European corporate landscape, Nestle (SIX:NESN) saw its stock rise by 0.4% following the announcement of its acquisition of a majority stake in Brazilian premium chocolate maker Grupo CRM. This transaction is expected to be completed in 2024. Grupo CRM boasts over 1,000 chocolate boutiques under the Kopenhagen and Brasil Cacau brands, along with a robust and growing online presence, according to Nestle.
SAP Acquires LeanIX
Conversely, shares of SAP (ETR:SAPG) declined by 0.3% as the German business software maker revealed its purchase of software management company LeanIX from investors.
Crude Oil Prices Weaken Amid Sluggish Chinese Trade Data
Oil prices experienced a decline on Thursday, retreating from ten-month highs due to growing concerns about slowing Chinese economic growth. This overshadowed another drawdown in U.S. inventories, indicating tightening supplies. The weak trade figures raised concerns that China, the world’s second-largest economy and the largest importer of crude oil, might miss its annual growth target of around 5%. Data from the American Petroleum Institute, released late on Wednesday, indicated a fourth consecutive weekly decline in U.S. crude inventories, with a 5.5 million barrel drop in the week ending September 1. This reading is typically seen as a precursor to the official inventory data from the Energy Information Administration, scheduled for later in the day.
As of 03:15 ET, U.S. crude futures were trading 0.4% lower at $87.19 per barrel, while the Brent contract declined 0.4% to $90.27. In addition, gold futures fell 0.1% to $1,942.25 per ounce, and the EUR/USD currency pair traded 0.1% lower at 1.0716.
