Introduction

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The Current Economic Landscape

European stocks followed China’s decline on Tuesday as new economic data pointed to weak factory activity in Asia and the eurozone, raising concerns among investors about a global slowdown in demand for goods.

The regional Stoxx Europe 600 index fell 0.7%, extending early morning losses, while Germany’s Dax lost 0.9% and London’s FTSE 100 fell 0.5%. The consumer goods sector led the decline, down 1.2%.

France’s Cac 40 was the biggest bearer in the region, down 1%, with shares of luxury groups LVMH and Hermes International both down around 2%.

The moves came as new data pointed to a continued slowdown in manufacturing activity in the euro zone, a sign that the region’s high borrowing costs and inflation were weighing on demand.

The HCOB’s final Eurozone Manufacturing Purchasing Managers’ Index fell to 42.7 in July from 43.4 the previous month, hitting its lowest level since May 2020, when the region’s economy was affected by the start of the Covid-19 pandemic.

The index measuring factory activity in Germany, the euro zone’s largest economy, fell to 38.8 from 40.6 the previous month. A reading below 50 means the majority of respondents reported a contraction in activity.

The declines echoed Chinese markets, where the CSI 300 index of stocks listed in Shanghai and Shenzhen fell 0.4% and Hong Kong’s Hang Seng lost 0.3%, as investors worried about the country’s stalled post-pandemic recovery.

The Caixin Manufacturing Purchasing Managers’ Index, a private sector survey that tracks monthly changes in factory activity, slipped to 49.2 in July from 50.5 in June, underestimating analyst forecasts. of 50.3.

The Impact on China’s Economy

The Politburo, China’s top decision-making body, had earlier pledged to extend support to prop up the world’s second-largest economy but provided few details, testing investors’ nerves.

“This limited policy support means China’s recovery will likely continue to be ‘tortuous’, uneven, and lengthy,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

Asian Markets and Reactions

Elsewhere in Asia, Japan’s Topix index rose 0.6% and South Korea’s benchmark Kospi index rose 1.3%.

Meanwhile, slowing inflation prompted Australia’s central bank to keep its benchmark rate unchanged for the second consecutive meeting, at 4.1%, defying market forecasts of a 0.25 percentage point hike. The S&P/ASX 200 gained 0.5%.

The meeting came a week after central banks in the United States and Europe raised rates but refrained from their usual hawkish directives, a sign that the global tightening cycle may soon be coming to an end.

In the United States, contracts that track Wall Street’s benchmark S&P 500 fell 0.2%, while those that track the technology-focused Nasdaq 100 fell 0.3% before the month. New York opening.

U.S. stocks posted their longest monthly winning streak in two years in July as signs of lower inflation and resilient growth gave investors hope that the U.S. Federal Reserve could end its cycle monetary tightening without triggering a recession.

“Market sentiment is assured and investors are expecting upside for the foreseeable future, and any downside along the way is dismissed as insignificant noise,” said Mike Zigmont, head of research and trading at Harvest Volatility.

Summary

In conclusion, the weak factory activity in Asia and the eurozone has raised concerns among investors about a global slowdown in demand for goods. European stocks followed China’s decline, with the regional Stoxx Europe 600 index, Germany’s Dax, and London’s FTSE 100 all experiencing losses. The slowdown in manufacturing activity in the euro zone and China has been attributed to high borrowing costs and inflation. While Asian markets like Japan and South Korea saw some positive growth, Australia’s central bank decided to keep its benchmark rate unchanged, signaling a possible end to the global tightening cycle.

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European stocks followed China’s decline on Tuesday as new economic data pointed to weak factory activity in Asia and the eurozone, raising concerns among investors about a global slowdown in demand for goods.

The regional Stoxx Europe 600 index fell 0.7%, extending early morning losses, while Germany’s Dax lost 0.9% and London’s FTSE 100 fell 0.5%. The consumer goods sector led the decline, down 1.2%.

France’s Cac 40 was the biggest bearer in the region, down 1%, with shares of luxury groups LVMH and Hermes International both down around 2%.

The moves came as new data pointed to a continued slowdown in manufacturing activity in the euro zone, a sign that the region’s high borrowing costs and inflation were weighing on demand.

The HCOB’s final Eurozone Manufacturing Purchasing Managers’ Index fell to 42.7 in July from 43.4 the previous month, hitting its lowest level since May 2020, when the region’s economy was affected by the start of the Covid-19 pandemic.

The index measuring factory activity in Germany, the euro zone’s largest economy, fell to 38.8 from 40.6 the previous month. A reading below 50 means the majority of respondents reported a contraction in activity.

The declines echoed Chinese markets, where the CSI 300 index of stocks listed in Shanghai and Shenzhen fell 0.4% and Hong Kong’s Hang Seng lost 0.3%, as investors worried about the country’s stalled post-pandemic recovery.

The Caixin Manufacturing Purchasing Managers’ Index, a private sector survey that tracks monthly changes in factory activity, slipped to 49.2 in July from 50.5 in June, underestimating analyst forecasts. of 50.3.

The Politburo, China’s top decision-making body, had earlier pledged to extend support to prop up the world’s second-largest economy, but provided few details, testing investors’ nerves.

“This limited policy support means China’s recovery will likely continue to be ‘tortuous’, uneven and lengthy,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics.

Elsewhere in Asia, Japan’s Topix index rose 0.6% and South Korea’s benchmark Kospi index rose 1.3%.

Meanwhile, slowing inflation prompted Australia’s central bank to keep its benchmark rate unchanged for the second consecutive meeting, at 4.1%, defying market forecasts of a 0.25 percentage point hike. . The S&P/ASX 200 gained 0.5%.

The meeting came a week after central banks in the United States and Europe raised rates but refrained from their usual hawkish directives, a sign that the global tightening cycle may soon be coming to an end.

In the United States, contracts that track Wall Street’s benchmark S&P 500 fell 0.2%, while those that track the technology-focused Nasdaq 100 fell 0.3% before the month. New York opening.

U.S. stocks posted their longest monthly winning streak in two years in July as signs of lower inflation and resilient growth gave investors hope that the U.S. Federal Reserve could end its cycle monetary tightening without triggering a recession.

“Market sentiment is assured and investors are expecting upside for the foreseeable future, and any downside along the way is dismissed as insignificant noise,” said Mike Zigmont, head of research and trading at Harvest Volatility.