In a recent turn of events, European stock markets experienced a decline in their performance, influenced by fresh indications of economic slowdown, both domestically and in China, along with growing concerns about potential Federal Reserve tightening measures.
As of 03:15 ET (07:15 GMT), the DAX index in Germany saw a 0.3% drop, while the FTSE 100 in the United Kingdom and the CAC 40 in France experienced a 0.3% and 0.1% decrease, respectively.
German Industrial Production Records Ongoing Weakness
Earlier on Thursday, data revealed that German industrial production faced a more significant decline than anticipated, falling by 0.8% in July. This figure exceeded the expected 0.5% drop and compounded the previous month’s revised 1.4% decline. These figures raise concerns about the Eurozone’s largest economy, which is also a crucial driver of regional growth, potentially slipping back into a recession.
The second-quarter estimate for Eurozone growth, set to be released later in the session, is expected to show a meager 0.3% growth on a quarterly basis and an annual growth rate of only 0.6%. These indicators collectively paint a grim picture for the Eurozone’s economic outlook.
Global Economic Woes Extend to China
It’s not just Europe facing economic challenges; China also reported declining figures in its August export and import data. Exports decreased by 8.8% year-on-year, while imports contracted by 7.3%. Although these numbers slightly exceeded expectations, they underscore the ongoing pressures faced by China’s manufacturing sector. Policymakers will likely need to focus on stimulating domestic demand to bolster economic growth, a vital concern for Europe as China remains a major market for the continent’s largest companies.
U.S. Inflation Concerns Resurface
Across the Atlantic, concerns over persistent inflation were reignited following the release of stronger-than-expected U.S. service sector data on Wednesday. Investors had recently grown more comfortable with the notion that inflation was receding in the United States, allowing the Federal Reserve to consider pausing its rate-hiking cycle and preventing a significant economic slowdown.
Several Federal Reserve officials are scheduled to speak later on Thursday at a fintech conference hosted by the Philly Fed. This event precedes the blackout period leading up to their meeting later this month, adding to market uncertainties.
Nestle Expands into the Brazilian Chocolate Market
In European corporate news, Nestle (SIX:NESN) shares rose by 0.4% after the Swiss food giant announced its intention to acquire a majority stake in the Brazilian premium chocolate maker Grupo CRM. The deal is expected to be finalized in 2024. Grupo CRM operates over 1,000 chocolate boutiques under the Kopenhagen and Brasil Cacau brands and has a robust and expanding online presence.
SAP Acquires LeanIX
On the other hand, SAP (ETR:SAPG) saw a 0.3% decline in its stock price after the German business software maker revealed its acquisition of software management company LeanIX from investors.
Oil Prices Weaken Due to Weak Chinese Trade Data
Oil prices experienced a decline, retreating from ten-month peaks. This shift was attributed to concerns over slowing Chinese growth, which overshadowed another decrease in U.S. inventories, indicating a tightening of supplies. The weak trade figures have raised doubts about China’s ability to meet its annual growth target of approximately 5%.
According to data from the American Petroleum Institute, U.S. crude inventories have fallen for the fourth consecutive week, with a decrease of 5.5 million barrels in the week ending September 1. This usually serves as a precursor to the Energy Information Administration’s inventory data, expected later in the day.
As of 03:15 ET, U.S. crude futures traded 0.4% lower at $87.19 a barrel, while the Brent contract dropped 0.4% to $90.27.
Additionally, gold futures fell by 0.1% to $1,942.25 per ounce, and EUR/USD traded 0.1% lower at 1.0716.
