Key Points
- European stocks declined, with Stoxx 600 down 0.19%, as China’s retail sales missed expectations.
- China’s 3% retail sales growth fell short of the 5% forecast, adding to economic concerns.
- French bonds suffered amid political instability and Moody’s unscheduled credit downgrade.
- German Chancellor Olaf Scholz faced a potential confidence vote loss, delaying fiscal support.
European stocks edged lower on Monday, with the Stoxx 600 index dipping 0.19% 0.97 to 515.48 amid weaker-than-expected retail sales data from China. This set the gauge for its third consecutive day of losses.
China reported a 3% year-on-year increase in retail sales, falling short of economists’ forecasts of 5% growth. The underwhelming data added to market disappointment following Beijing’s recent announcement to boost consumption, which lacked substantive details on fiscal stimulus.
According to Charu Chanana, chief investment strategist at Saxo Markets, the figures reflect the severity of China’s economic challenges, with stimulus efforts prioritizing appearances over substantial improvement. She noted the need for more decisive action to spur recovery, given repeated false starts and potential tariff risks.
French bonds underperformed as private-sector business activity contracted for the fourth consecutive month. The country’s political turmoil deepened after the government collapsed due to a budget dispute, further eroding market confidence. Moody’s Ratings compounded concerns by downgrading France’s credit rating in an unscheduled move late Friday.
Chancellor Olaf Scholz faced a likely confidence vote defeat on Monday in Germany, which could trigger new elections amid ongoing economic struggles. Analysts at Brown Brothers Harriman remarked that fiscal support in Germany would take time to materialize as forming a new coalition government could take months. As a result, the European Central Bank may need to provide additional monetary support in the interim.
Global equity markets started the week tepidly, with MSCI’s Asian equity gauge declining for a second day. Chinese shares led regional losses, while benchmarks in Australia and Japan also fell. Asian currencies weakened to a two-week low, driven by poor performance in materials and consumer discretionary stocks.