European Stocks Lower; Caution on Chinese Slowdown

European stock markets traded lower Monday, as weak Chinese economic data pointed to a Covid-induced slowdown while geopolitical turmoil prompted caution.

At 3:50 AM ET (0750 GMT), the DAX in Germany traded 0.4% lower, the CAC 40 in France fell 0.6% and the U.K.’s FTSE 100 dropped 0.8%.

European markets tracked losses in Asia earlier Monday after data released in China earlier in the day showed industrial production rose 6.4% year-on-year in July, and retail sales grew 8.5% year-on-year in the same month, both lower than expected.

This slowdown is the result of the second largest economy in the world, and a key growth driver, tightening mobility restrictions to combat the spread of the highly-transmissible delta variant of the Covid-19 virus.

In neighboring Japan, the GDP grew 0.3% quarter-on-quarter and 1.3% year-on-year in the second quarter, avoiding a double-dip recession despite continued restrictions to contain the coronavirus.

The collapse of the Afghan government after Taliban insurgents took over Kabul, the capital, has added to the negative sentiment.

Back in Europe, there is little in the way of tier one economic data due for release Monday.

In the corporate sector, HSBC stock fell 0.5% after Europe’s largest bank by assets agreed to acquire AXA’s insurance assets in Singapore for $575 million as it beefs up its insurance and wealth business. AXA stock also fell 0.5%.

HSBC said the combined business would be the seventh-largest life insurer and the fourth-largest retail health insurer.

Sticking with the M&A theme, Bloomberg reported Monday that Saudi Aramco is in advanced talks to acquire a stake of roughly 20% in the oil refining and chemicals business of Reliance Industries for up to $25 billion.

Elsewhere, oil prices fell by over 1% Monday on concerns mobility restrictions in China, the second largest importer of crude in the world, will hit fuel demand.

China’s daily crude throughput last month fell to the lowest since May 2020 as independent refiners slashed production, according to data from the National Bureau of Statistics on Monday. That was the first year-on-year decline since March last year when the coronavirus hit hard.

By 3:50 AM ET, U.S. crude futures traded 1.8% lower at $66.94 a barrel, while the Brent contract fell 1.6% to $69.45.

Additionally, gold futures fell 0.1% to $1,777.60/oz, while EUR/USD traded marginally lower at 1.1787.

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