European and Asian stocks fall on weak Chinese export data

Global stocks retreated on Tuesday after new data reinforced investors’ concerns over an economic slowdown in China and Italy announced a surprise windfall tax on its banks.

Financial stocks in Europe were lower after Italy’s deputy prime minister announced a 40 per cent windfall tax on banks that have recently profited from rising interest rates.

The region-wide Stoxx Europe 600 index fell 0.5 per cent, with the Stoxx Europe 600 Banks index down 2.7 per cent. The Cac 40 in Paris lost 0.9 per cent and the Dax in Frankfurt fell 1.2 per cent.

Italian lender Intesa Sanpaolo was among the top decliners, down 8.1 per cent, and domestic rival UniCredit fell 5.7 per cent. The shockwaves spread out across Europe. In France Crédit Agricole fell 3 per cent and BNP Paribas 2.9 per cent while Germany’s Commerzbank dropped 3.8 per cent.

Asian markets were lower after new data showed China’s exports fell by the most since the beginning of the Covid-19 pandemic, amplifying concerns over the country’s economic growth.

Hong Kong’s Hang Seng index dropped 1.8 per cent, led by declines in consumer goods and property, while China’s benchmark CSI 300 was down 0.3 per cent. 

The moves came after official data showed China’s exports declined 14.5 per cent year on year in July, the most since February 2020. The country’s imports fell 12.4 per cent, much higher than the 5 per cent decline forecast in a Reuters poll of economists.

A slowdown in global and domestic demand for goods weighed on the world’s second-largest economy, which also grappled with a weak property sector. China has struggled to regain momentum after ending three years of severe pandemic restrictions earlier this year.

The bleak trade numbers on Tuesday reinforced expectations that China’s sluggish economic activity would slow further in the third quarter, increasing pressure on policymakers to enact new stimulus measures.

“While the export numbers square with slowing overseas demand, the weak imports data is the latest piece of evidence that more stimulus is urgently needed to boost domestic confidence and spending,” according to analysts at UBS.

The renminbi slid 0.3 per cent to trade at Rmb7.2192 a dollar, its weakest level since mid-July.

Investor attention turns to China’s inflation figures coming out on Wednesday, with expectations of 0.4 per cent deflation in July after prices were stagnant in the previous month.

The reading will be followed on Thursday by the consumer price index from the US, which has been struggling to cool prices. High inflation prompted the Federal Reserve to take interest rates to their highest level in 22 years.

“A series of subdued monthly [inflation] prints would be highly encouraging for the Fed,” said Jamie Dutta, market analyst at Vantage. “It would rein in talk that policymakers still have more work to do and cement the soft landing theme.”

Contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-focused Nasdaq 100 both lost 0.5 per cent ahead of the New York open.

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