European stocks unwound early losses at the hands of lacklustre Chinese manufacturing data after data at home came in above expectations, lessening fears that China’s slowdown is weighing on Europe’s economy.
The final Eurozone manufacturing PMI came in at 52.3 in October, ahead of the 52.0 expected and a rise over the 52.0 in September. The British pound soared after UK manufacturing surprised by rising to 55.5 in October against expectations of a fall to 51.3 from 51.8 in September.
One of the chief sources of distress for markets has been the impact on the more export-sensitive manufacturing sector from the China slowdown. Today’s manufacturing data implies concerns over the impact of China’s slowdown on manufacturing in the UK and Europe may be a little overdone.
Weakness in manufacturing, thought to be down to weakness in China and strength of the US dollar has been one of the major drags on the US economy. Should the ISM manufacturing PMI for the US confound expectations of a decline like the equivalents in Europe, that would be one reason to conclude a December rate hike from the Fed is still possible.
Basic resource and oil & gas sectors haven’t taken too well the latest set of weak Chinese data. Anglo American (L:AAL), Antofagasta (L:ANTO) and Royal Dutch Shell (L:RDSa) were all top fallers on the FTSE 100. Hikma Pharmaceuticals (L:HIK) led the healthcare sector lower after the drugmaker lowered guidance on its generic business.
HSBC was a top faller on the FTSE 100 after reporting poorly-received third quarter results. Lower fines helped HSBC report a 32% rise in pre-tax profits but the slowdown in Asia contributed towards a 4% decline in revenue. Shares are lower because the revenue-drop confirms fears over the impact of the slowdown in Asia and the delay in HSBC’s decision over moving its headquarters adds an unnecessary source of uncertainty.
US stocks are expected to open higher on Monday. Earnings are expected from Dow heavyweight Visa, investor court-case mired AIG as well as high-flying tech stock FitBit on Monday.
USA pre-opening levels
S&P 500: 2 points higher at 2,081
Dow Jones: 33 points higher at 17,696
Nasdaq 100: 11 points higher at 4,659
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