EU markets start lower on cut to Chinese growth forecast

European markets started lower on Monday as investors reacted to a weaker trading session in Asia that saw the Nikkei and Hang Seng both lose around 1% after Chinese growth forecasts was downgraded to 7.5% by Premier Wen Jiabao.

At 9.45am the FTSE 100 had lost 0.5% with financial and mining stocks the key drag on the UK Index, whilst the DAX and CAC also traded lower, with both indices falling around 1%.

There has been a firm follow through of weakness from Asia trading to European Indices this morning, with a lack of significant news to focus on other than the Chinese data and individual company news, such as better than expected earnings from Intertek.

Investors have started the new trading week on the back foot, looking to downsize the amount of risky stocks they hold in their portfolio’s though with much major economic data due out this week, including non farm payrolls on Friday, we could see prices jump around as the week progresses.

Chinese growth target cut to eight-year low
The downgrade, which now sets Chinese growth at 7.5% for 2012, is having a negative impact on heavyweight mining stocks within the FTSE 100, with shareholders reducing their exposures to stocks such as Kazakhmys and Rio Tinto on concerns of slowing demand for metals from the world’s largest emerging economy.

The cut in growth target for 2012 from 8% to 7.5% is not necessarily a surprise but perhaps the fact that it has been cut so deeply echoes existing investor concerns over the pace of slowdown in the worlds’ fastest emerging economy. On the other hand, Premier Wen has historically sided with being more conservative in growth targets and so there is the potential for growth to exceed these targets by year end, though much of this will be dictated by the strength of the European economic recovery and Chinese monetary policy, which Wen indicated will remain ‘cautious but flexible’.

Data out of China also showed that its services sector rose to its fastest pace in four months with the HSBC Services PMI reading at 53.9 from 52.5 in January.

UK services sector falls more quickly than expected
Data showed that the UK services sector growth slowed more quickly than expected in February, coming in at 53.8 when a reading of 54.9 was expected, having hit 56 in January. The fact that it missed forecasts will be the headline but a reading above the all important 50 level still indicates growth, albeit weak growth at that, a view echoed today by the British Chamber of Commerce. The reaction to the weaker than expected services data by investors trading stocks and the pound sterling this morning was minimal however.

Intertek shares gain after earnings
Shares in Intertek rose 2.6% to the top of the FTSE 100 performers list after the firm reported a 23% rise in full year profits and boosted shareholder optimism by maintaining it was confident of strong growth in 2012. 2011 pre tax profit came in at £260.1million, which was higher than the firms original forecast of £245million.