The Morning Show: China concerns keep investors jittery

A look at the coming day in the European and international markets of Ankur Banerjee

Markets are still reeling from the mediocre Chinese data set and with the economic calendar now lightening, concerns about a faltering post-COVID-19 recovery in the world’s second largest economy are likely to persist as Europe wakes up.

A weak Chinese recovery has cast a shadow over global markets, particularly in Europe, where the consumer, technology, industrial and materials sectors are highly exposed to China.

This means that investors are likely to have a mixed appetite for European stocks.

The focus will be on luxury goods companies in Europe, which took a hit on Monday after disappointing earnings from owner Cartier Richemont (CFR.S), dragging down the European STOXX 600 (.STOXX).

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell for the second day in a row after data on Monday showed China’s economy faltered in the second quarter, piling pressure on policymakers to offer more stimulus.

On Tuesday, China announced a series of measures aimed at boosting the consumption of household consumer goods and services.

Meanwhile, speculators accumulated their largest long position in sterling in dollar terms since Brexit. Investors and hedge funds say, though, that the pound is unlikely to last, citing runaway inflation and weak growth.

In the currency market, the euro touched a 17-month high, while the pound sterling was hovering near a new 15-month peak.

Traders expect more rate hikes from the European Central Bank and Bank of England to combat inflation, even as markets assume the Federal Reserve is nearing the end of its hiking cycle.

Investors will also focus on Danone (DANO.PA) after a source close to the matter told Reuters that the French dairy group is reviewing its legal options after the Russian state took control of its subsidiary in the country.

Elsewhere, China and the United States are meeting this week in Beijing to seek ways to cooperate on both domestic policy and international trade in reducing greenhouse gas emissions. The meeting comes as Asia, Europe and the United States are feeling the heat as temperatures rise.