Today's markets: Gloomy start in Europe as China shines

It’s a gloomy start to the week in Europe this morning with markets failing to take their cue from China, which continues its tremendous run from last week. The FTSE 100 is down nearly 0.5 per cent this morning with no real rhyme or reason for who’s down, except Rightmove, whose shares are falling after it rejected a fourth takeover approach.

Some updated GDP figures may have soured the mood with the Office for National Statistics saying the UK economy grew by 0.5 per cent in the second quarter, not the 0.6 per cent initially thought. An increase in household savings has seen some suggest that Labour’s rhetoric on the public finances and the economy might be scaring some into holding onto cash, leading to the downgrade.

The weakness extends across Europe, however, with the Dax down about the same and shares in Paris down a huge 1.5 per cent, with updates from carmakers dragging down sentiment among manufacturers. It could of course be money flowing out and straight into China, with the Shanghai Composite rising a huge 8 per cent overnight, adding to its already stellar gains last week. Shares are up more than 20 per cent since markets opened last Monday. And everything keeps on rising despite new data showing that Chinese manufacturing activity fell in September, so there is a chance the stimulus rally finds itself against cold hard facts at some point, but that’s for next week, with the Chinese stock markets closed until next week as the country celebrates Golden Week.

It’s not all good news for Asian stocks, Japan’s Topix fell 3.1 per cent following the selection of Shigeru Ishiba as the next prime minister, who then called a snap election. The Nikkei fell nearly 5 per cent. The yen weakened slightly but not enough to boost exporters with the country heading the polls on 28 October. 

Closer to home and Nationawide’s latest house price index showed prices were continuing their gentle upward trajectory but are still tracking lower than the 2022 highs, while mortgage approvals support this, and are now at the highest level since August 2022, when the stamp duty holiday started winding down. 

A lot of data this week will dictate when the next rate cut comes. It’s the triple employment statistics kind of week, with ISM, Jolts and the big one, the non-farms, all due between tomorrow and Friday. The narrative has shifted from inflation to unemployment, so expect some wild swings if anything shows the Fed needs to act again quickly, or acted hastily with its 0.5 percentage point cut earlier this month.

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By Taha Lokhandwala