Stock Market

European Stock Futures Decline as Weak Chinese Manufacturing Data Takes a Toll

Anticipating Disappointing Chinese Manufacturing Data, European Stock Markets Set to Open Lower

As the day unfolds, European stock markets are preparing to commence trading on a less optimistic note due to lackluster Chinese manufacturing data. This comes as a precursor to the forthcoming release of significant regional inflation figures.

In Germany, the DAX futures contract displayed a 0.5% decline as of 02:00 ET (06:00 GMT). Meanwhile, CAC 40 futures in France experienced a 0.4% drop, and the FTSE 100 futures contract in the U.K. fell by 0.5%.

The recently unveiled data revealed that China’s manufacturing sector contracted for the second consecutive month in May. The official manufacturing purchasing managers’ index for China registered at 48.8, falling below the projected 51.4 and the previous month’s reading of 49.2. This downturn indicates a deceleration in the rebound that was witnessed earlier in the year within the world’s second-largest economy and a critical export market for European enterprises.

Moreover, the Chinese non-manufacturing purchasing managers’ index for the month stood at 54.5, lower than expectations of 54.9 and the previous reading of 56.4. Consequently, the composite PMI, which signifies overall Chinese business activity, declined to 52.9 in May from the prior month’s 54.4.

The disappointing economic results from China overshadowed the news that the U.S. debt ceiling bill cleared a crucial procedural hurdle, inching closer to a vote in the House of Representatives later in the day.

Shifting our focus back to Europe, national Consumer Price Index (CPI) releases from France, Germany, and Italy for May are set to dominate the economic calendar. These figures will pave the way for Thursday’s flash eurozone inflation data.

The state of North Rhine Westphalia in Germany, the most populous in the country, initiated the reporting earlier in the day by disclosing an annual inflation rate of 5.7% in May. Notably, this figure was significantly lower than the expected 6.8% and the revised prior reading of 6.7%.

This development, combined with Tuesday’s encouraging decline in Spanish consumer prices, bolsters the stance of European Central Bank officials who contend that the continent’s historical surge in prices is fading and that interest rate increases may soon reach their conclusion.

Turning our attention to corporate news, Glencore (LON:GLEN) is reportedly nearing an increase in its offer for Teck Resources (NYSE:TECK) in an effort to secure the acquisition of the Canadian mining company, according to a Bloomberg News report.

On the energy front, oil prices experienced a weakening trend on Wednesday following the disappointing Chinese economic data, which further raised concerns about the recovery of the world’s second-largest economy and the largest importer of crude oil.

This shift in sentiment starkly contrasts the optimism observed at the beginning of the year and raises questions regarding whether China’s rebound will drive oil demand to reach record highs in 2023.

At 02:00 ET, U.S. crude futures traded at $69.39 per barrel, recording a marginal 0.1% decrease, while the Brent contract dropped by 0.1% to $73.62.

Furthermore, gold futures observed a 0.3% increase, reaching $1,982.35 per ounce. Conversely, the EUR/USD currency pair experienced a 0.4% decline, trading at 1.0692.

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