European stock markets experienced a decline on Monday following the release of Chinese growth data that fell short of expectations. Simultaneously, the second-quarter earnings season is set to commence with full force.
At 03:30 ET (07:30 GMT), Germany’s DAX index saw a 0.2% drop, while the U.K.’s FTSE 100 traded down 0.1%, and France’s CAC 40 experienced a 0.7% fall.
Slowing Chinese Growth Raises Concerns
Sentiment in Europe took a hit on Monday due to the release of data indicating a substantial slowdown in China’s economic growth during the second quarter. China serves as a significant export market for Europe’s largest companies.
China’s gross domestic product (GDP) for the second quarter grew by 0.8% compared to the previous quarter, slightly surpassing the anticipated growth of 0.5%. However, this growth rate represents a significant deceleration from the 2.2% growth witnessed in the preceding quarter.
On an annualized basis, the second-quarter GDP expanded by 6.3%, primarily due to a lower basis for comparison with the COVID-impacted period of last year. Nonetheless, this figure fell short of the expected growth rate of 7.3%.
Although the Chinese economy has achieved a cumulative growth of 5.5% in 2023 thus far, mainly attributed to a strong first quarter, growth has slowed over the past three months.
Investors Respond to the Numbers
Investors leveraged these figures to sell after the healthy gains observed in the previous week. The broad-based Stoxx 600 index had climbed nearly 3% following data that indicated cooling inflation in the U.S., which led to expectations of the Federal Reserve potentially concluding its aggressive rate-hiking cycle, thus boosting the U.S. economy.
ECB Speakers on the Agenda
The economic data calendar for Monday is relatively sparse, with only the final Italian consumer prices being reported. However, investors will pay close attention to speeches from ECB Board members Fabio Panetta, Frank Elderson, and Philip Lane, as well as President Christine Lagarde. These speeches may provide insights into the central bank’s perspective leading up to the next policy-setting meeting toward the end of this month.
Commencement of Quarterly Earnings
This week marks the beginning of the new quarterly earnings season, although the schedule for Monday is relatively light.
In addition, the Russian state has assumed control of Danone’s (EPA:DANO) Russian subsidiary, a major French food company, and has also acquired Carlsberg’s (CSE:CARLa) stake in a local brewer, as stated in a decree signed by President Vladimir Putin on Sunday. Danone’s stock witnessed a 0.3% decline, while Carlsberg dropped 0.9%.
H&M (ST:HMb) stock slipped by 0.2% after the fashion retailer announced its plans to launch physical stores and online trading in Brazil by 2025.
Across the pond, Tesla (NASDAQ:TSLA) will be the first among the notable growth and technology companies to report its earnings on Wednesday. Bank earnings will also continue, with Bank of America (NYSE:BAC) reporting on Tuesday and Goldman Sachs (NYSE:GS) on Wednesday.
Oil Prices Decline Following Weak Chinese GDP Data
Oil prices edged lower on Monday as disappointing Chinese growth data raised concerns about the economic recovery and future demand in the world’s biggest crude importer.
Moreover, two out of three Libyan oil fields that were shut down on Thursday, including the country’s second-largest field, Sharara, resumed production over the weekend, thereby increasing the global oil supply.
As of 03:30 ET, U.S. crude futures traded 1.1% lower at $74.50 per barrel, while the Brent contract dropped 1.1% to $79.02.
Both benchmark indices registered a third consecutive week of gains, reaching their highest levels since April.
