Monday 12:00 BST
What you need to know
- Mining stocks provide support in Europe after upbeat Chinese growth data
- Chinese economy on track for first annual GDP acceleration since 2010
- Oil holds around $49 a barrel after China numbers
- Chinese stocks bounce up from lows after the data
- European equities stutter as investors eye strong euro
- ECB and BoJ policy meetings due on Thursday
- S&P 500 and Dow expected to extend record highs
“The strength of the euro is problematic, especially so close to the key $1.15 level, as the focus shifts this week to the ECB ahead of its monetary policy meeting on Thursday,” says Ronan Carr, European equities strategist at Bank of America Merrill Lynch.
“European equity investors are increasingly focused on currency and rates markets too. Further strength in the euro will pressure exporters and dollar earners in sectors like industrials, consumer staples and healthcare. Financials are trading very closely with interest rate expectations.”
Forecast-beating growth data from China are providing some distraction from the ever-present influence of monetary policy, with meetings from the European Central Bank and Bank of Japan due on Thursday.
Data showed the Chinese economy grew 6.9 per cent year on year in the second quarter, matching the previous three months and putting the economy on track for its first annual acceleration since 2010.
China’s stock markets were mixed — tracking concern about tighter regulation — but are held up off lows for the session, which they hit ahead of the data.
European miners are encouraged by the numbers and are setting the pace on the region’s stock markets. The Euro Stoxx mining index is up 1.5 per cent, while the Euro Stoxx 600 is slipping 0.2 per cent as investors watch the euro, which is holding around 10-month highs.
Monetary policy is never far away from the forefront of the agenda. Investors do not expect an overhaul in policy guidance from the ECB this week, as the wait for healthier growth rates to translate into inflation continues.
But in the run-up to the meeting, attention is likely to remain on the euro and its proximity to the $1.15 level, with policymakers sensitive to the strength of the shared currency as the eurozone’s recovery beds in.
Metals stocks are in the driving seat helping the FTSE 100 outperform, with its heavily-weighted mining sector. London’s main index is up 0.6 per cent while Frankfurt’s Xetra Dax 30 is down 0.2, with export stocks among the most notable fallers.
Chinese stocks tumbled at the open on fresh concern about tighter regulation of the country’s financial markets. It came after remarks from Chinese president Xi Jinping said officials must “get a grip” on “zombie” companies kept alive by infusions of cheap credit. The publication of the data pulled stock indices up off their lows.
The Shanghai Composite index closed down 1.4 per cent, having been 2.6 per cent weaker in initial trade. Hong Kong’s Hang Seng ended up 0.3 per cent.
The euro is slipping, but remains above $1.1450, down 0.2 per cent on the session at $1.1455. The $1.15 level will be in focus in the run-up to the ECB’s meeting on Thursday, a level to which the central bank is perceived to be sensitive to the shared currency’s strength.
The dollar index, a measure of the US currency against a basket of peers, is inching above 10-month lows hit on Friday, up 0.2 per cent at 95.298. The greenback fell as much as 0.6 per cent on Friday as a reading on retail sales and inflation added weight to Federal Reserve chair Janet Yellen’s comments to Congress that were perceived as dovish.
Brent crude is holding around $49 a barrel and heading for a sixth successive day of gains, up 0.1 per cent at $48.97. West Texas Intermediate, the US marker, was up by the same amount, at $46.59 a barrel.
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