European stock markets remain under pressure after disappointing Chinese figures!
After ending last week on a negative note, European stock markets are expected to remain under pressure following disappointing Chinese retail sales figures released on Monday. Retail sales in China rose just 3% year-on-year in November, marking the slowest pace in three months and falling well short of economists' expectations for a 5% rise. The data has dampened sentiment in Asian stock markets and is likely to continue to put downward pressure on European markets on Monday, particularly in consumer stocks.
Optimism in European markets early last week, fueled by China's promise to adopt "a proactive fiscal policy and looser monetary policy" in the new year, has since faded. Weak Chinese retail sales and trade data, along with lower-than-expected inflation numbers, dampened investor sentiment.
Growth-sensitive sectors, including consumer luxury goods, mining and energy stocks, are particularly vulnerable. Shares of top luxury brands such as LVMH, Hermès and Kering rallied early last week on hopes of Chinese stimulus, but erased those gains to end the week flat. In the energy sector, TotalEnergies saw its shares fall for the fourth day in a row on Friday, after a brief rally on Monday. The French oil and gas producer's stock hit its lowest level since August 2023, with political instability adding to bearish sentiment.
European mining stocks also faced sharp selling after a short-lived rally. Australia-based BHP, which is dual-listed on the London Stock Exchange, fell more than 4% from its weekly high, reflecting the broader decline in the sector. China's consumer spending rose briefly in October, boosted by the Singles' Day sales event. Still, the slowdown in retail sales growth reflects ongoing challenges for the world's second-largest economy, despite Beijing's continued stimulus efforts.
Other economic data for November presented a mixed picture. Industrial production rose 5.4% year-on-year, maintaining October's pace, while fixed asset investment rose 3.3% for the first 11 months of the year, slightly below October's 3.4% increase. Trade data further highlighted the headwinds, with exports rising 6.7% year-on-year and imports falling 3.9%.
Both figures were well below economists' forecasts of an 8.7% increase and a 0.9% increase, respectively. Meanwhile, the consumer price index (CPI) eased to 0.2%, the slowest pace since June, underscoring subdued domestic demand. On a more positive note, the decline in Chinese house prices moderated for the third consecutive month in November. New home sales prices fell 0.2% from last month, the softest decline in 17 months.
This improvement reflects the impact of government easing measures, including the People's Bank of China's steep rate cuts in October, which pushed key 1-year and 5-year lending rates to record lows. Despite this, some analysts believe the Chinese economy could regain momentum in 2025 if the government makes good on its stimulus pledge outlined at last week's Politburo meeting.
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