European stock markets traded in a mixed fashion Monday, as investors digested better-than-expected German inflation numbers as well as persistent concerns about Chinese economic growth.
German wholesale prices show signs of improvement
European investors received a minor boost Monday after German wholesale prices fell 0.2% to the month in July, considerably better than the 1.4% drop expected, a sign of life in the battered German economy.
That said, this still represented an annual fall of 2.8% as the eurozone’s largest economy struggles with the toxic mix of weak trading with key partner China and a slump in its large manufacturing and construction sectors.
Additionally, the possibility of U.S. interest rates rising further after Friday’s stronger-than-expected producer price index will act as a drag on the global economy.
The reading, which came after data also showed an increase in consumer inflation, pushed up concerns that the Federal Reserve will keep hiking when it next meets in September.
Concerns surrounding China’s property sector weigh
There also remain worries about China’s debt-laden property sector.
Country Garden (HK:2007), one of the country’s biggest developers, warned of a hefty $7.6 billion loss in the first half of 2023, prompting sharp selling to a new record low on Monday.
The company is also facing difficulty in meeting its debt obligations, having suspended trading in 11 of its onshore bonds, prompting fears of a default and more headwinds for the country’s economic recovery from its COVID hit.
China has the second-largest economy in the world, and is a major regional growth driver as well as a massive market for Europe’s largest companies.
U.S. retail sector dominates quarterly earnings
There are few tier-one companies scheduled to report earnings in Europe Monday, but Philips (AS:PHG) stock climbed over 4% after Dutch investment firm Exor (AS:EXOR) took a 15% stake in the healthcare company.
Most of the corporate attention this week is likely to be focused on the U.S. retail scene.
A number of the largest U.S. retailers are set to report their results, which will give investors an important insight into the health of consumer spending, a major driver of the U.S. economy.
Crude falls on rising dollar, China concerns
Oil prices retreated Monday, as concerns about China’s faltering economic recovery as well as a stronger dollar prompted profit-taking after seven weeks of gains on tightening supply from OPEC+ output cuts.
Friday’s U.S. producer price index release saw the dollar climb to a five-week high, which hurts demand for crude as it makes the commodity more expensive for international buyers.