Markets waver as Chinese economy slows

LONDON: World stock markets wavered Monday on news that China's economy grew at its weakest pace in nearly three decades, hit by the US trade war.

London's benchmark FTSE 100 index added 0.2 percent and Frankfurt's DAX 30 rose 0.3 percent but the Paris CAC 40 dipped 0.1 percent.

Asian equities initially stumbled but then staged a recovery, as traders digested Chinese second-quarter gross domestic product (GDP) numbers, while also debating the depth of an expected US interest rate cut.

China's economy expanded 6.2 percent in the second quarter, the slowest reading since the early 1990s, official data showed. The outcome was in line with forecasts and within the government's target range.

"There's no doubt in anyone's mind that the trade war is a major contributing factor here," noted Oanda analyst Craig Erlam.

- Bright spots -

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Yet, despite the slowing GDP, the month of June held some bright spots for the Chinese economy, dealers said.

That handed a partial boost to the mining sector because China is a leading consumer of many raw materials.

Chinese industrial output rose 6.3 percent, from 5.0 percent in May, which was the slowest increase since 2002.

Fixed-asset investment also picked up, rising 5.8 percent on-year in January-June, from 5.6 percent in January-May.

China's 1.3 billion consumers also continued to open their wallets, with retail sales growing 9.8 percent on-year in June, up from 8.6 percent in May.

"The Chinese data, while confirming slowdown fears, seems to be lifting basic resource stocks," Erlam said.

"A decent rebound in industrial production is naturally driving this, easily exceeding expectations, and along with retail sales and investment figures, arguably indicates that worst fears are not being realised."

The GDP number nevertheless highlights the negative impact the US tariffs stand-off is having on China as leaders also try to recalibrate its growth model from exports and state investment to one driven by consumer spending.

Observers also pointed out that the weakness raised the chances of further monetary easing measures from the central People's Bank of China, with investors also tracking the progress of the latest trade talks between Washington and Beijing.

- Fed rate cut -

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Wall Street turned in another vintage performance on Friday, with a record-breaking close for all three main indices in New York.

There are bets the US Federal Reserve will cut borrowing costs at the end of the month, though there is speculation about how far it will go.

While bank boss Jerome Powell's congressional testimony last week flagged a reduction, data indicating inflation remains reasonably healthy has kept investors guessing.

"The Fed is under pressure to cut the interest rate this year," noted ThinkMarkets analyst Naeem Aslam.

- Key figures around 1100 GMT -

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London - FTSE 100: UP 0.2 percent at 7,518.13 points

Paris - CAC 40: DOWN 0.1 percent at 5,568.99

Frankfurt - DAX 30: UP 0.3 percent at 12,355.64

EURO STOXX 50: FLAT at 3,497.34

Hong Kong - Hang Seng: UP 0.3 percent at 28,554.88 (close)

Shanghai - Composite: UP 0.4 percent at 2,942.89 (close)

Tokyo - Nikkei 225: Closed for a holiday

New York - Dow: UP 0.9 percent at 27,332.03 (close Friday)

Euro/dollar: UP at $1.1278 from $1.1270 at 2100 GMT

Pound/dollar: DOWN at $1.2555 from $1.2572

Dollar/yen: DOWN at 107.90 yen from 107.91 yen

Brent North Sea crude: UP 0.5% at $67.06 per barrel

West Texas Intermediate: UP 0.4% at $60.41 per barrel