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Chinese inflation data hints towards further slowdown

Markets began the week in a negative fashion today, with indices marginally lower in Europe suggesting investors were sceptical of any significant developments out of today’s euro-group meeting and tomorrow’s congregation of the Finance Ministers of the European Union’s 27 member states. The day’s theme appeared to be a continuation of the post summit (i.e. the one held last weekend) disappointment, and caution following weak US non-farm payroll data on Friday. Nowhere was this more evident in the bond yields of the Spanish government, which broke above the 7% level in the secondary market today.

Elsewhere, Chinese inflation dropped to a 29 month low today as the consumer price index rose only 2.2% in the year to June, stoking fears about the health of China’s slowing economy. It was below the 3% yearly increase to May, and well below the 4% government target. Stocks with significant exposure to China experienced a mild sell-off, with miners and energy companies joining luxury goods manufacturer Burberry and emerging market asset manager Ashmore Group at the bottom of the FTSE 100. Complicating the picture however was a rise in commodity prices (particularly industrial metals such as copper), on hints from Chinese Premier Wen Jiabao that the poor data may lead to authorities to ease monetary conditions.

The FTSE 100 finished not far from its lows of the day, down 35 points (or 0.6%) at 5627. It was perhaps the heavy concentration of mining companies that ensured it finished below its European peers who were lower by around 0.35% on the day.

This was posted in Bdaily's Members' News section by James .