European stock slumps after weak lead from Asia


LONDON: Europe’s main stock markets fell Wednesday after more sharp losses in Asia, as investors digested mixed survey data in the region.

London dipped on figures, which showed a post-Brexit contraction in the economy’s dominant services sector in July, stoking recession worries in the wake of the recent EU exit vote.

In Britain, the services purchasing managers’ index (PMI), compiled by financial data firm Markit, showed a reading of 47.4, the lowest since March 2009. That was down from 52.3 in June — the biggest monthly fall in activity on record. Any reading below the boom-bust 50 points line indicates no growth.

The gloomy data helped cement hopes that the Bank of England will cut interest rates to a record-low 0.25 percent when it meets on Thursday, dealers said.

There was mixed news in the eurozone, where Markit’s Composite PMI for July came in at 53.2  points, up from 53.1 points in June.

The index measures companies’ readiness to spend on their business and so gives a good idea of how the underlying economy is performing.

Current growth was supported by Germany, Europe’s biggest economy – but France continued to stagnate.

The eurozone services PMI meanwhile stood at 52.9, up from 52.8. The figures sent Frankfurt stocks tentatively lower and Paris fell 0.3 percent in value. “Wednesday’s services slump seems a far more British, rather than European, phenomenon,” said Spreadex analyst Connor Campbell.

“Despite this news effectively guaranteeing some kind of action from the Bank of England tomorrow, the FTSE floundered.

“The eurozone was just as miserly as the FTSE despite the fact that its own services PMIs were relatively solid.”

Most Asian indices tumbled for a second day Wednesday, with Tokyo taking a hit from a strong yen after Japan’s economy-boosting stimulus programme fell flat with investors.

Stocks rallied last month on promises of support from central banks. But disappointment about stimulus, weak US data, plunging oil prices and worries about European banks have sent dealers scurrying for cover. Japan’s government on Tuesday unveiled details of a 28 trillion yen package that it hopes will kick start growth in the world’s number three economy.

But the plan fell short of market expectations, as only a quarter of it is new spending. The yen, seen as a safe haven asset in times of uncertainty, surged as a result.

The disappointing package – unveiled days after another sub-par stimulus from the Bank of Japan — saw the dollar tumble to a three-week low.

Hong Kong stocks sank 1.8 percent, with traders also playing catch-up with regional losses Tuesday when the city’s exchange was closed because of a typhoon.

However, banking giant HSBC ended 1.8 percent higher in Hong Kong after it announced a $2.5 billion stock buyback and said it would maintain its dividend.

The lender’s London share price rallied almost four percent in value.

Elsewhere, Tokyo’s Nikkei closed down 1.9 percent as the stronger Japanese currency dragged on the country’s exporters.

Source: AFP

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