The prospect of more Chinese stimulus that set commodity markets on fire yesterday failed to light up European stock markets as doubts grew over new eurozone stimulus and economic policy.
Frankfurt, London and Paris stocks ended the day with losses of less than half a percentage point after having been down over a percentage point in earlier trading.
London’s FTSE 100 index fell 0.3% to 6,182.4 points at close; Frankfurt’s DAX 30 was 0.5% to 9,778.93, while Paris’ CAC 40 fell 0.3% to 4,442.29. The EURO STOXX 50 edged Down 0.7% at 3,017.60.
Analyst Jasper Lawler at traders CMC Markets said European markets dropped “despite signals of government stimulus from Chinese authorities that sent iron ore prices skyrocketing and boosted listed mining and resource shares.”
The stimulus, aimed at adding vim to flagging Chinese economic growth, “did little to address concerns that recent market gains may have gone too far,” he added.
Sentiment was also dampened by a weekend warning by the Bank of International Settlements (BIS) of a “gathering storm that has been building for a long time” on global markets.
“Especially notable is the BIS comment that investors are fearful that the world’s central banks are running out of options—something that does not bode well for Thursday’s ECB (European Central Bank) meeting,” said Spreadex analyst Connor Campbell yesterday.
Investors are also uncertain over whether the ECB will deliver new stimulus moves when it reveals its latest monetary policy decision later this week.
“Reports last week that there is a lack of unity within the ECB over potential new monetary stimulus measures has removed some of the appetite for stocks on the continent,” noted Lawler.
In contrast to Europe, Asian stocks began the week in buoyant mood, cheering a strong pick-up in US job creation while weighing China’s weekend decision to lower its growth target but expand spending.
At the start of its annual policy congress Saturday China set a target of 6.5%-7.0% expansion this year — as expected — as it tries to combat a slowdown in global trade and to transition from dependence on exports and investments to consumer-led growth.
But in a two-hour speech, Premier Li Keqiang promised to loosen the money belt and projected the biggest budget deficit in several decades, putting on the back-burner its drive to combat bulging government debt.
He also pledged reform of state-owned enterprises, many of which are plagued by inefficiencies and overcapacity.
Shanghai stocks ended up 0.8%, with investors also cheered by an expected delay in a plan to speed up initial public offerings.
The Chinese announcement helped basic resource stocks, with shares miners Antofagasta jumping 7.6%, Anglo American climbing 6.1% and Glencore 6.7%.
But despite Brent oil breaking $40 for the first time since early December shares in European oil majors found little sheen, with BP slipping 0.6% and Royal Dutch Shell’s A share dipping 0.2%.
Shares in EDF were a top loser in European trading, falling 6.7% after the French energy giant’s financial chief quit over its £18bn (€23.2bn, $25.5bn) plan to build a next-generation nuclear plant at Hinkley Point in southwestern Britain.
On Wall Street, stocks opened lower yesterday, pausing from the rally of the last three weeks, but by late morning the Dow Jones Industrial Average had recovered its losses and was showing a 0.3% gain.