European stocks finished lower Monday, with mining shares pulling back as Chinese economic data highlighted concerns surrounding a global trade war. Bank stocks advanced however, as Deutsche Bank AG offered a brighter outlook for its upcoming earnings report.
How are markets performing?
Germany’s DAX 30 index /zigman2/quotes/210597999/delayed DX:DAX +0.46% tacked on 0.2% to 12,561.02, supported by Deutsche Bank shares, which rose on Monday.
The U.K.’s FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.20% ended 0.8% lower to close at 7,600.45, weighed in part by mining and oil stocks.
France’s CAC 40 index /zigman2/quotes/210597958/delayed FR:PX1 +0.71% closed 0.4% lower at 5,409.43.
In currencies, the euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0086% rose to $1.1706 from $1.1685 late Friday in New York. Britain’s pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.4148% fell to $1.3227, up from $1.3234.
What is driving the market?
European stocks had a sluggish start to the week as trading got under way, with mining stocks being dragged down after data showed China’s gross domestic product slowed slightly in the second quarter. The Stoxx Europe 600 Basic Resources Index /zigman2/quotes/212670217/delayed XX:SXPP +0.10% fell 1% on Monday.
Second quarter growth in China — the largest consumer of industrial metal copper — came in at 6.7%, the slowest rate since the third quarter of 2016, as Beijing continued efforts to stoke deleveraging at financial institutions.
While the growth numbers were in line with expectations, they raised questions about the health of the Chinese economy, the world’s second largest, as its trade spat with the U.S., including retaliatory tariffs, continues. The U.S. government last week said it’s looking to expand its import tariffs against Chinese goods to $200 billion in products.
“Equities are not yet discounting a trade-war scenario and we see a 20% plus decline driven by a combination of lower earnings and multiple contraction. Markets have started to discount the risk following recent announcements and we estimate that Asia is already discounting our escalation scenario,” said Tao Wang, head of Asian economic research at UBS, in a research note published Monday.
“We see U.S. and European equity markets declining 10% and 7%, respectively, in our Escalation Scenario, suggesting that this is not yet fully priced in,” Wang wrote.
Europe, China and the U.S. have a duty “not to start trade wars,” said European Council President Donald Tusk on Monday at a summit between European Union and Chinese officials in Beijing. President Donald Trump called the EU “a foe” of the U.S. in an interview with CBS Evening News that aired Sunday.