European and Asian stock markets diverged on Monday, with investors digesting weak eurozone economic indicators and a rate cut by China’s central bank.
In Europe, it was a rather mixed bag. Frankfurt’s stock market saw a rise while London and Paris markets dipped at the start of the week. European equity markets appeared to be lacking a clear direction, influenced by eurozone and British economic data. The euro and the pound both weakened against the dollar in response.
Interestingly, eurozone business activity saw its first decline in seven months this September. France’s momentum waned following the Paris Olympic Games, as revealed by the S&P Global’s purchasing managers’ index (PMI), which slipped to 48.9 this month from 51 in August. Any figure below 50 implies contraction. Joshua Mahony, chief market analyst at Scope Markets, noted that these numbers "cast a shadow over the recovery hopes of the eurozone." For more on PMI, you may visit S&P Global.
Conversely, UK PMI data showed continued growth in September but at a slower rate. Daniel Mahoney of Handelsbanken mentioned how "the release presents a broadly positive outlook for the UK’s economy, but concerns about the budget loom large."
Moving to Asia, Shanghai’s markets experienced a slight rise despite another round of data highlighting a weak Chinese economy. China is facing its highest youth unemployment rate this year, necessitating further growth-boosting measures. Investors are hopeful that more stimulus, especially for the struggling property sector, will come following China’s central bank’s decision to reduce the 14-day lending rate. However, Hong Kong shares dipped, and Tokyo markets were closed for a holiday.
Interestingly, in Colombo, stocks fell after Anura Kumara Dissanayaka, a Marxist figure, won the presidential election. This sparked worries about a $2.9 billion International Monetary Fund bailout that demands significant tax hikes and austerity measures.
In commodities, oil prices inched up amid concerns over escalating tensions in the Middle East, following Israeli strikes in Lebanon. Gold prices also held firm around record highs at $2,650, bolstered by the US Federal Reserve’s hefty interest rate cut and ongoing geopolitical worries.
Speaking of the US, the recent rate cut by the Federal Reserve had led to a rally, pushing US equities to record highs last week. Investors are looking for a “soft landing” for the primary global economy. Eyes are now focused on the release of the personal consumption expenditures index this week, the Fed’s preferred inflation metric, which might provide cues about future rate changes.
Below are key market figures at 12:25 GMT:
- London – FTSE 100: FLAT at 8,229.63 points
- Paris – CAC 40: DOWN 0.1 percent at 7,494.89
- Frankfurt – DAX: UP 0.7 percent at 18,843.32
- Tokyo – Nikkei 225: Closed for a holiday
- Hong Kong – Hang Seng Index: DOWN 0.1 percent at 18,247.11 (close)
- Shanghai – Composite: UP 0.4 percent at 2,748.92 (close)
- New York – Dow: UP 0.1 percent at 42,063.36 (close)
Currency Exchange Rates:
- Pound/dollar: DOWN at $1.3304 from $1.3316 on Friday
- Euro/dollar: DOWN at $1.1110 from $1.1160
- Dollar/yen: DOWN at 143.77 yen from 144.02 yen
- Euro/pound: DOWN at 83.54 pence from 83.80 pence
Oil Prices:
- Brent North Sea Crude: DOWN 0.1 percent at $74.41 per barrel
- West Texas Intermediate: FLAT at $71.00 per barrel
