The European market (Stoxx-600) closed around 354.38 Monday, slumped by almost -0.97% on China slowdown concern and subdued earning cues & guidance from Wall Street. China’s December industrial (corporate) profit dips for the 2nd consecutive month and the slowest pace of yearly growth since 1990, in another sign of an economic slowdown. China’s industrial profits for December fell by a more-than-expected 1.9%, the second monthly decline and a figure that brings the 2018 tally to 10.3%, almost halved compared to 2017.
The industrial bellwether Caterpillar (NYSE:CAT) and chipmaker Nvidia reported subdued earnings and issued lower than expected guidance due to a lingering slowdown in China and other APC region. Overall, the market is concerned about not only China slowdown, but the downgrade of corporate earnings in the days ahead as a significant part of their earnings are China dependent.
Chinese consumers are now probably spending next to its US peers and thus any slowdown in China is causing a global alarm. Europe is also very sensitive to China, being one of the largest trading partners and thus any China “cold” is also causing “high fever” in Europe. Central banks from Fed to ECB are all watching China closely. Draghi also hoped for China recovery in the days ahead in a speech Monday. But the European market sentiment was further dragged after Draghi said the Eurozone economy has performed worse than expected in recent months.
The European market was supported by a rebound in telecoms (bargain hunting after few days of plunge) and miners on hopes of rising iron ore prices following the dam collapse at the Vale mine in Brazil, while it was dragged by banks, techs, automobiles and energies (as oil tumbled on China/global growth worries and higher US supplies).
On early Tuesday, Stoxx-600 is currently trading around 356.30, surged by almost +0.54% on defensive push such as utilities, consumer goods amid subdued earnings report card and lingering China cold/trade war tensions. Earlier Stoxx-600 made a low of 354.20 on a report that the US has leveled serious criminal charges against China's telecom giant Huawei and issued a formal extradition request to Canada for the Huawei CFO Meng just days before the next round of talks between the two warring nations.
The US prosecutors have charged Huawei lied to bank executives about its relationship with a company in Iran called Skycom, falsely asserting that it was not an affiliate of the larger company. In a pair of cases unsealed Monday, Federal prosecutors accused Huawei of violating the US sanctions on Iran and of stealing trade secrets from a US business partner, portraying the company for flouting to US laws while trying to do business in the country.
Overall, this may be coincidental, but Trump may be trying to use the Huawei CFO Meng as a leverage for the China trade talks, which could jeopardize the whole trade negotiations.
Germany 30
On Monday, export-heavy and China sensitive Germany’s DAX-30 slumped -0.63% to close around 11210.31 after making a session low-high of 11196.42-11275.21 in a day of moderate volatility. Germany was dragged by basic resources, retailers, mixed pharmaceuticals & healthcare, while helped by telecoms (Deutsche Telekom (DE:DTEGn)) and chemicals (Beiersdorf)
France 40
France’s CAC-40 plunged -0.76% to close around 4888.58 and made a session low-high of around 4912.10-4878.62 in a day of rangebound trade. France was dragged by utilities, water & gas, and financials. Alstom (PA:ALSO) plunged on reports of reports of new concessions to try to satisfy the European Commission's antitrust concerns over their plan to merge with Siemens.
Italy 40
Italy’s FTSE MIB-40 tumbled -1.02% to close around 19608.13 and made a session low-high of 19569.24-19776.29 in a day of moderate volatility. Italy’s government undersecretary said it’s very hard to prove high-speed rail link to France does not make any sense. The undersecretary also clarified that the government is considering a role for state lender CDP in privatization push.
UK 100
The UK’s FTSE-100 crumbled -0.91% to close around 6747.10 and made a session low-high of 6812.53-6734.00 in a day of volatile trading despite lower GBP, positive for exporters/MNCs. The UK market was dragged by China pessimism, energies (lower oil). China/Asia savvy bank such as HSBC skid, luxury goods maker Burberry slips. Retailers dragged as Tesco (LON:TSCO) stumbled on reports of cost-cutting and huge job retrenchment. Ocado (LON:OCDO) jumped on reports of talks with Marks & Spencer on a food-delivery service,