European stock markets experienced a downturn, primarily due to concerning Chinese economic indicators preceding the release of final business activity data for the region.
As of 03:25 ET (07:25 GMT), key European indices were in the red: Germany’s DAX index dropped by 0.5%, the UK’s FTSE 100 fell by 0.6%, and France’s CAC 40 declined by 0.8%.
The Global Sentiment Hit by Weak Chinese Data
Market sentiment took a hit with the release of a private-sector survey indicating that China’s services sector expanded at its slowest pace in eight months in August. Despite attempts at stimulus, the world’s second-largest economy struggled to gain significant momentum.
The Caixin services purchasing managers’ index reported a reading of 51.8 in August, falling short of expectations (53.6) and July’s figure (54.1).
This disappointing data offset some optimism from Monday when property developer Country Garden received bondholder approval to extend certain debt deadlines, averting a potential default.
China plays a vital role in the markets of Europe’s largest companies, and the ongoing economic challenges in China have had a negative impact on their financial performance.
Likely Disappointing Eurozone Services Activity Data
Back in Europe, there was unexpected contraction in Spanish services PMI for August, which dropped to 49.3 from the previous month’s 52.8. Similar readings across Europe are expected to paint a similarly bleak picture of the region’s economy.
A series of lackluster economic data from the eurozone, particularly in Germany, the region’s largest economy and a major growth driver, has increased the likelihood of the European Central Bank (ECB) pausing its rate-hiking cycle later this month.
ECB President Christine Lagarde is scheduled to speak later on Tuesday, and her remarks will be closely monitored for hints of any further action.
Lagarde commented on Monday, stating, “It will be critical for central banks to keep inflation expectations firmly anchored while these relative price changes play out.” She noted that price fluctuations are influenced by labor and energy market shifts as well as geopolitical uncertainties.
Renault Plans to Float EV Division Next Year
In corporate news, Renault’s Ampere electric vehicle division is set to go public with a potential valuation of up to 10 billion euros ($10.8 billion), according to Chief Executive Luca de Meo in an interview with the Financial Times. Renault’s stock saw a 0.4% increase on Tuesday.
De Meo mentioned on Monday that the French auto giant is still planning to list Ampere in the spring of 2024, contingent on favorable market conditions.
Crude Oil Prices Dip Amid Ongoing Chinese Economic Challenges
Oil prices edged lower on Tuesday due to weak Chinese services activity data, signaling more challenges for the world’s second-largest economy and the largest crude oil importer.
However, these declines were modest as traders awaited news regarding supply cuts from key OPEC+ members, Saudi Arabia and Russia, this week, which could lead to further market tightening.
At 03:25 ET, U.S. crude futures were trading 0.4% lower at $85.67 per barrel, maintaining levels last seen in November, while the Brent contract dropped 0.4% to $88.61, nearing its highest point since late January.
In addition, gold futures experienced a 0.1% decline, reaching $1,962.25 per ounce, and the EUR/USD currency pair traded 0.3% lower at 1.0764.