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European equities drop on poor China data, inflation fears

18 Oct, 2021
European markets head lower after disappointing Chinese data. File Photo
European markets head lower after disappointing Chinese data. File Photo

LONDON: Europe's stock markets sank Monday after a mixed Asian session, as investors tracked weak Chinese data and fears that high inflation will spell tighter global monetary policy.

China's economic growth eased to 4.9 percent in July-September, slower than forecasts, as a crackdown on its property sector and an energy crisis began to bite.

"European markets head lower after disappointing Chinese data," said IG analyst Joshua Mahony.

Elsewhere Monday, oil prices hit multi-year peaks on tight supplies and soaring demand.

Bitcoin rose above $62,800, with optimism that US regulators will make the cryptocurrency more attractive to traditional investors.

It had hit its all-time high of $64,870 in April before plunging on Chinese regulatory concerns.

Traders on Monday assessed weekend remarks from European Central Bank chief Christine Lagarde and Bank of England (BoE) boss Andrew Bailey, against a backdrop of simmering inflationary pressures.

Lagarde stated that high inflation was "largely transitory", indicating the ECB's supportive monetary policy would continue.

In contrast, Bailey warned that the BoE might "have to act" to curb rising inflation, signalling its main interest rate might rise soon from its record-low 0.1 percent.

"The difference between two central bank governors could hardly be any more pronounced," noted Commerzbank analyst Ulrich Leuchtmann.

Rising interest rates increase borrowing costs for companies, which can weigh on their share prices.

Some central banks -- including in South Korea and New Zealand -- have recently hiked borrowing costs.

"Rising inflation pressures are increasingly putting the pressure on central banks to act," warned Mahoney.

Low interest rates and huge central bank stimulus has helped to prop up the economy during the pandemic. But the US Federal Reserve is expected to begin paring its stimulus before the end of the year.