Morning auction: China worries shake investors

A glimpse of Ankur Banerjee’s future in European and global markets

Markets are still reeling from China’s unimpressive data, and with the economic calendar now light, worries about a stuttering post-Covid-19 recovery in the world’s second-largest economy are likely to linger as Europe wakes up.

An anemic Chinese recovery has also weighed on global markets, particularly in Europe, where the consumer, technology, industrials and commodities sectors all have significant exposure to China.

That means investors will have mixed appetite for European stocks.

The focus will be on Europe’s luxury companies, which took a hit on Monday after lower earnings from Cartier owner Richmond ( CFR.S ) dragged down the pan-European STOXX 600 index ( .STOXX ).

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell for a second day after China’s economy showed weakness in the second quarter.

On Tuesday, China announced a series of measures aimed at boosting consumption of household goods and services.

Meanwhile, post-Brexit, speculators have piled their biggest long positions in sterling against the dollar. While the party in the pound is unlikely to last, hedge funds and investors say, citing unmanageable inflation and weak growth.

In the currency market, the euro hit a 17-month high, while sterling was nearing a new 15-month high.

While markets speculated that the Federal Reserve is at the end of its hiking cycle, traders expect more interest rate hikes from the European Central Bank and the Bank of England to fight inflation.

Investors will also focus on Danone ( DANO.PA ) after a source close to the matter told Reuters that the French milk group is reviewing its legal options after the Russian government took control of its subsidiary.

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Elsewhere, China and the United States met in Beijing this week to seek ways to cooperate on both domestic policy and international trade in reducing greenhouse gas emissions. The meeting comes as Asia, Europe and America heat up.

Reuters Graphics
Reuters Graphics

Key developments likely to impact markets on Tuesday:

Revenue: Morgan Stanley, Bank of America, Charles Schwab, Hasbro

Report by Ankur Banerjee in Singapore; Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.

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