China Woes, Hawkish ECB & Inflation Sends Markets Lower

Home > Analysis > China Woes, Hawkish ECB & Inflation Sends Markets Lower

European equity markets have continued their decline this morning, taking their cues from a sell-off in China and Hong Kong.

Many mainland Chinese indices were down by more than -2.0% this morning, whilst Hong Kong’s Hang Seng index fell by -3.79% taking its weekly losses to -5.18%.

The index was already a global laggard and is now down by whopping -27.0% over the last 52 weeks, and is trading below all major moving averages.

The sluggish Chinese economy, which does not appear responsive to stimulus, may be in danger of falling into a damaging deflationary spiral, of falling prices and contracting growth.

Q4 GDP data released this morning showed that the Chinese economy expanded by a below-forecast +5.20%.

Data also showed that the population of China continues to decline, falling by more than -2.0 million people last year.

The ECB talks down rate cut hopes

Further hawkish comments from the ECB today, over the timing of any future interest rate cuts, added to the gloomy mood and helped to send the DAX, CAC and MIB indices down by more than -1.00%. This is the second set of hawkish comments this week, from the central bank.

IMI gets singled out

Closer to home the FTSE 100 is down by -1.50% with falls across the board.

The only bright spot in the top 100 this morning is an engineer as the IMI share price is up by +4.60% following an upgrade at Goldman Sachs.

The US bank now rates the stock as a buy and has raised its price target to £20.20, up from £17.80p.

Goldman says that IMI should benefit from a long-term CAPEX (capital expenditure) supercycle and a short-term recovery in industrial production.

UK inflation weighs on the builders

The largest faller in the top flight this morning is from a house builder as the Persimmon share price is down by -4.19%, that despite an upgrade yesterday from US brokers Jefferies.

Fellow builders Taylor Wimpey shares and the Barratt Developments share price are also down on the day.

The sector seems to have reacted to higher-than-anticipated UK inflation data released earlier this morning, which showed that inflation rose by an above-forecast +4.0% in December, denting hopes of an early Bank of England interest rate cut.

Big volume in a troubled retailer

Troubled fast fashion retailer Boohoo Group shares traded more than 29.0 million shares this morning falling by -2.40% in the process.

The stock normally turns over 5.60 million shares per day so it is a significant jump in trading activity.

Looking at the trade recap it appears that two blocks of 10,000,000 shares each traded at 33.335p at 9.38 am.

Has a seller been cleared out? Not, judging by the share price performance, but let’s watch this space.

US index futures suggest that Wall Street will open lower, down by around -0.50%, oil prices have taken another leg lower, with Brent crude down by -1.97%.

Crypto frost

Whilst in the world of cryptocurrencies, Bitcoin continues to drift and is down by another -1.58% today, and by almost -6.0% over the last week.

The launch of spot bitcoin ETFs has not boosted prices as crypto enthusiasts had anticipated.

Scroll to Top