Stocks diverge, oil retreats as China disappoints markets ~ EconomyLens.com

London (AFP) – Major stock markets diverged and oil prices fell more than two percent Monday as traders reacted to more weak data from China following a pledge by the country’s finance minister to boost the world’s second-biggest economy. One of the week’s key events, meanwhile, occurs Thursday when the European Central Bank is expected to lower interest rates again as anxiety about inflation in the eurozone fades and concerns over sluggish growth mount.

The euro was lower against the dollar and pound Monday, while the single-currency bloc’s main Paris and Frankfurt stock markets opened the week by moving in opposite directions. Outside the eurozone, London dipped after Shanghai closed higher and Hong Kong finished down Monday. Wall Street experienced more record-highs Friday as strong US company earnings added to positive sentiment over the world’s biggest economy ahead of the country’s presidential election next month.

Oil prices slid Monday as concerns about the outlook for China’s economy offset fears of escalating conflict in the crude-rich Middle East, analysts said. “The devil is always in the detail and once again China has glossed over how it intends to accelerate economic growth,” noted AJ Bell investment director Russ Mould. China’s finance minister Lan Fo’an on Saturday said the country would issue special bonds to bolster banks, signalling an impending spending spree to shore up the property market and ease local government debt.

Harry Murphy Cruise, an economist at Moody’s Analytics, said the announcement “ticked most of the right boxes, but it lacked detail on the scale and scope of new spending,” adding that “we expect more supports to be announced through the remainder of the year.” Authorities have been seeking to boost domestic activity and shore up China’s ailing property sector. In recent weeks, Chinese policymakers have unveiled a string of measures to stimulate activity and spur household consumption.

Following the latest announcement, official data Sunday showed China’s consumer inflation rate slowed in September, in a sign that demand remains fragile. Separate figures Monday revealed that China’s export growth slowed sharply in September while imports remained sluggish. Investors are eyeing key Chinese data later in the week, including on retail sales, trade, and economic growth.

“While the full effects of the recent economic measures may not be immediately evident in the upcoming data releases, these figures will provide more insight into how China’s economy is faring and whether additional actions may be necessary,” said Tony Sycamore, analyst at IG trading group.