Stock Market

European Stocks Dip Following Disappointing Chinese Growth Figures; Earnings Season Gains Momentum

European stocks took a hit today as disappointing Chinese growth data came in, while companies prepare for the eagerly anticipated second-quarter earnings season.

Early in the day, Germany’s DAX index saw a 0.2% drop, the FTSE 100 in the U.K. experienced a 0.1% decline, and France’s CAC 40 fell by 0.7%.

The mood in Europe turned sour after news emerged that China, a crucial export market for Europe’s major corporations, recorded significant slowdowns in economic growth during the second quarter.

China’s gross domestic product (GDP) for the second quarter showed a growth of 0.8% compared to the previous quarter. Although this surpassed expectations of 0.5% growth, it was a sharp slowdown from the 2.2% growth experienced in the preceding quarter.

Looking at the bigger picture, the annualized GDP growth for the second quarter came in at 6.3%. While this was still a positive figure, it fell short of the projected 7.3% growth. The lower comparison base resulting from the COVID-impacted period last year contributed to this decrease.

Thus far in 2023, the Chinese economy has expanded by a total of 5.5%, primarily driven by a robust first quarter. However, growth has significantly tapered off over the past three months.

These figures led investors to cash in on the gains made last week when the broad-based Stoxx 600 index surged nearly 3%. The market reacted positively to cooling inflation data in the U.S., which fueled expectations that the Federal Reserve may be nearing the end of its aggressive rate-hiking cycle, thereby boosting the U.S. economy.

As for today’s economic calendar, the schedule is relatively light, with only the release of final Italian consumer prices. However, market participants eagerly await speeches from key European Central Bank (ECB) figures, including Fabio Panetta, Frank Elderson, Philip Lane, and President Christine Lagarde. These speeches may provide insights into the central bank’s thought process ahead of the upcoming policy-setting meeting later this month.

The upcoming week marks the beginning of the quarterly earnings season, although the lineup for Monday is relatively modest.

In other news, the Russian government has assumed control of Danone’s (EPA:DANO) Russian subsidiary and acquired Carlsberg’s (CSE:CARLa) stake in a local brewery, according to a decree signed by President Vladimir Putin on Sunday. Consequently, Danone’s stock dipped by 0.3%, and Carlsberg (OTC:CABGY) experienced a 0.9% decline.

H&M (ST:HMb) saw its stock slip by 0.2% following the retailer’s announcement of plans to launch stores and online trade in Brazil by 2025.

Across the pond, investors eagerly anticipate Tesla’s (NASDAQ:TSLA) report, which kicks off the earnings announcements for massive growth and technology companies, scheduled for Wednesday. Meanwhile, bank earnings continue with Bank of America (NYSE:BAC) on Tuesday and Goldman Sachs (NYSE:GS) on Wednesday.

Meanwhile, oil prices experienced a dip in response to the disappointing Chinese GDP figures, raising concerns about the global economic recovery and potential future demand from the world’s leading crude importer.

Furthermore, two out of three Libyan oil fields that were shut down last Thursday, including the country’s second-largest field, Sharara, resumed production over the weekend, thereby adding to the global oil supply.

At 03:30 ET, U.S. crude futures dropped by 1.1% to $74.50 per barrel, while the Brent contract saw a 1.1% decline to $79.02.

Despite today’s setback, both benchmarks recorded their third consecutive week of gains, reaching their highest levels since April.

In other markets, gold futures experienced a 0.4% fall, reaching $1,955.95 per ounce, while the EUR/USD currency pair saw a marginal 0.1% increase, trading at 1.1242.

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