Stock markets wobble on China woes

Data showing weak Chinese economic performance hit stock market trading on Monday, offsetting optimism over an expected US interest-rate cut.

Major Asian markets mostly closed lower, but European markets were able to throw off the downbeat sentiment in late afternoon trading. Frankfurt’s DAX ended the day with a small gain to set a new record close.

Wall Street was shut for a US public holiday.

Investor sentiment was jolted by worries over China’s economy after a report showed activity in the country’s manufacturing sector contracted for a fourth consecutive month in August and more than expected.

The weekend data “rang alarm bells”, noted Joshua Mahony, chief market analyst at trading group Scope Markets.

China’s manufacturing sector “clearly remains in a troublesome position as the country attempts to navigate its way out of the recent real estate fuelled slowdown”, he added.

In August, the Purchasing Managers’ Index (PMI) — a key barometer of industrial output — stood at 49.1 points, the National Bureau of Statistics announced.

This represents a stronger contraction than in July (49.4 points) for the index, which is based in part on company order books.

A figure above 50 indicates an expansion in manufacturing activity, while below that is a contraction.

The update came as Chinese leaders face calls to unveil fresh stimulus measures — particularly for the troubled property industry — with observers warning the government’s GDP growth target of “around 5 per cent” could be missed this year.

Following the Chinese figures, oil prices fell slightly but later recovered, while the yuan dropped against the dollar.

The data added to concerns over weak Chinese demand, including for the luxury sector, with British fashion brand Burberry falling 2.2 per cent, while in Paris Gucci-owner Kering shed 0.7 per cent.

However, stock in British online real estate firm Rightmove soared 21.8 per cent after Australian peer REA Group, majority-owned by Rupert Murdoch’s News Corp empire, said Monday it is mulling a multi-billion-pound takeover.

Shares in Volkswagen climbed 1.3 per cent after the German auto giant warned staff it may need to cut jobs and close factories — including in Germany.

Elsewhere, focus remained fixed on by how much the Federal Reserve would cut US interest rates in September.

Figures on Friday showed the Fed’s favoured gauge of inflation — personal consumption expenditures index — fell in line with forecasts in July, setting the bank up to ease monetary policy this month.