LONDON (AFP) – European stock markets rebounded yesterday as bank shares recovered and after a mixed showing by Asia.
Data revealed China slipped into deflation, compounding worries about the world’s second biggest economy after the United States (US).
Bank shares recovered one day after sliding when Italy imposed a windfall tax on lenders and owing to concerns over the health of the sector in the US.
“Chinese economics dominates the headlines,” noted head of equity funds at Hargreaves Lansdown Steve Clayton.
“China is now witnessing the actual cost of goods both in stores and at the factory gate falling. It is indicative of a significant slowdown in the Chinese economy, which is beset by high levels of indebtedness.”
The 0.3-per cent drop in China’s July consumer prices was the first since the start of 2021 and comes as slowing domestic spending weighs on the country’s economic recovery.
Investors were already in a dour mood a day after China announced its biggest drop in exports since the beginning of the Covid pandemic more than three years ago, while imports also tanked owing to slimming demand at home.
An extended period of disappointing indicators out of Beijing this year has ramped up pressure on authorities to provide much-needed support to the economy. However, while leaders have made a number of pledges in recent weeks to introduce stimulus – particularly for the property sector — there have been very few concrete moves save for some small interest rate cuts by the People’s Bank of China.
Observers warned that the headline-grabbing bazooka officials have unleashed in the past is unlikely owing to the country’s huge debt pile and concerns about an already weak yuan.