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China's Economic Health Concerns Trigger European Stocks's Decline

The shaky inflation data from China has led to a decrease in the value of European stocks, casting uncertainty on the global economy.

Flag of China and chart
Flag of China and chart

European Markets Respond to Chinese Inflation Data

The performance of European stock markets was subdued on Monday due to concerns raised by the weak Chinese inflation data. This caused anxiety about the stability of the world's second-largest economy. Specifically, Germany's DAX index, France's CAC 40, and the UK's FTSE 100 traded lower by 0.4%, 0.4%, and 0.1% respectively as of 03:30 ET (07:30 GMT).

Chinese Disinflation Signals Possibility of Policy Easing

The data released earlier on Monday revealed a 0.2% drop in China’s consumer prices for June, leaving the annual figure flat. This marked the slowest pace since 2021. Additionally, the producer prices for the same period plummeted by 5.4%, marking the fastest decrease in seven-and-a-half years. This suggests the Chinese government might resort to further monetary and fiscal policy easing. However, it also indicates Beijing's challenge in avoiding a potential deflationary spiral, which could significantly affect corporate Europe given the Chinese market's importance to European exporters.

US Inflation Data Eyed Amid Rate Hike Expectations

European markets will also be paying close attention to US inflation data this week. Wednesday's release is anticipated to show a 3.1% annual rise in the consumer price index for June, the slowest increase since March 2021. Following the June jobs report, the Federal Reserve is expected to resume rate hikes later this month.

Kering's Acquisition and Debt Concerns Impact Stock Movements

In corporate news, Kering's (EPA: PRTP) stock dropped 0.5% after it was reported that the Gucci owner paid a hefty €3.5 billion for acquiring luxury French fragrance label Creed in June. With the looming possibility of interest rate hikes, investors have been scrutinizing debt-laden companies. Concerns over Casino Guichard Perrachon's (EPA: CASP) €3 billion debt maturing in the next two years resulted in a 3% drop in stock value. Thames Water also announced plans for an additional £750 million investment to manage its £14 billion borrowings.

Oil Price Drops Amid Concerns Over Chinese Demand

The apprehension over China's economic health has also impacted oil prices, which slipped on Monday. As of 03:30 ET, US crude futures traded 0.9% lower at $73.20 a barrel, while the Brent contract fell 0.9% to $77.78. This followed a significant gain last week when both benchmarks hit their highest since May. This was spurred by Saudi Arabia and Russia's announcement to deepen supply cuts in August. Similarly, gold futures fell by 0.1% to $1,929.95/oz, and the EUR/USD traded 0.1% lower at 1.0955.