It’s been a pretty lacklustre start to the Friday session across European markets:
- FTSE 100 -0.15%
- CAC 40 -0.42%
- DAX +0.07%
- FTSE MIB +0.25%
Connor Campbell, a financial analyst at SpreadEx, said it’s an understandable reaction to the Chinese growth figures:
As the pound holds its breath ahead of ‘super Saturday’, the markets dealt with another disastrous – well, relative to the country’s usual performance – figure out of China.
Coming in at a worse than forecast 6.0%, China’s third quarter GDP reading saw growth at its lowest for nearly 3 decades… The country is clearly continuing to feel the trade war squeeze, putting all the more pressure on the so-far insubstantial – and uncertain, given the dispute over Hong Kong – ‘partial trade deal’ announced last weekend.
Over in Europe, carmakers are taking a hit after Renault cut its sales guidance and profitability forecasts.
Renault made the admission after yesterday’s close and markets are now getting a chance to react to the news, sending shares down -11% and making it the worst performer on the CAC 40.
The company said yesterday that sales were likely to drop between 3-4% this year, while its operating margin was set to come in at 5% compared to its previous target of 6%.
Carmakers have been struggling with falling demand in key markets like China, while straining to meet European emissions requirements and invest in new tech to producer cleaner car models.
It’s the latest challenge for Renault, which recently ousted its CEO Thierry Bollore as part of a leadership overhaul. The company has been trying to draw a line under a scandal linked to former boss Carlos Ghosn, who is alleged to have misused company funds.
The knock on effects of Renault’s sales warning has sent Fiat Chrysler shares down -2.4% and Daimler down nearly 2%.
Chinese stocks haven’t fared well in the wake of the GDP data, with the Shanghai Composite Index dropping by -1.2%
Elsewhere, Hong Kong’s Heng Seng fell -0.46%, while Japan’s Nikkei 225 rose +0.18%.
Introduction: China’s economic growth misses forecasts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
While uncertainty over Boris Johnson’s Brexit deal hits front pages in Europe, China’s slowing growth is dominating news out of Asia.
Fresh figures released overnight show Chinese GDP grew just 6% between July and September. That’s less than economist forecasts for 6.1%, slower than the 6.2% expansion recorded in the previous quarter, and is the lowest level recorded since the early 1990s.
While that’s still within the Chinese government’s 6.0-6.5% target range, it’s a stark reminder that Beijing’s superhuman growth can’t last forever.
Unsurprisingly, the country’s trade war with the US has taken a toll on the Chinese economy, which is also struggling to drum up enough domestic demand to support its growth.
There was a notable improvement in Chinese industrial production in September, which grew 5.8% year-on-year in September compared to 4.4% in August while retail sales came in at 7.8% compared to 7.5% a month earlier.
But the headline figure for third quarter growth has still raised the likelihood that Beijing will resort to interest rate cuts or other stimulus measures to give the economy a bit of a boost.
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Meanwhile, the EU summit continues in Brussels, and across the pond, IMF and World Bank meetings in Washington start to wrap up.
- 09:30am BST: UK government debt and deficit figures for June
- 09:30am BST: UK construction statistics
- 6:45pm Bank of England governor Mark Carney speaking at “Governor Talks” IMF event