European shares fall following disappointing Chinese data

European shares fell in early trading on Thursday after weak Chinese manufacturing data renewed concerns over slowing global growth, putting pressure on resource firms and oil companies which tracked oil prices lower. European banks also fell back over continued uncertainty as to whether Spain would apply for a fully fledged bailout.

China’s Purchasing Manufacturers’ Index (PMI) for September showed that manufacturing activity in China slowed for an 11^th straight month. The figure came in at 47.8, slightly ahead of Augusts’ figure of 47.6, but staying firmly below the 50 point expansion threshold for the longest stretch in eight years and indicating economic contraction. The recovery of the manufacturing sector in China is becoming excruciatingly slow; however, the fact that the figure is slightly up on last month suggests that the situation could be stabilizing.

Disappointing figures from China, the world’s largest consumer of metals, inevitably results in a hammering for the share prices of resource firms and today is no different. By mid morning Evraz had lost 4.5% of its share price value, whilst Vedanta lost 3.3% and Anglo American fell over 3.1%.

Oil firms were also putting pressure on the European Indices as oil futures fell to price levels not seen since early August and putting week-to-date losses at over 5%.

Despite these global concerns the eurozone problem is never far from investor’s minds and the Spanish bond auction of 10-year debt this morning took a big focus. The short term debt auction on Tuesday was successful and it is hoped that the ECB’s promise to support struggling countries is expected to help lower Spain’s 10-year borrowing cost today. Indeed the 10-year auction itself was broadly successful, with a higher bid to cover ratio of 2.8 against a ratio of 2.4 last time around, whilst average yields also cooled from 6.647% to 5.666%.

Here in the UK, Retail sales lowered slightly in August from July as the Olympics distracted potential customers from purchasing online, with the biggest fall in internet orders for over four years. The drop in online orders outweighed the increase in sales of sporting goods although on a quarterly basis sales were overall 0.6~% higher than the three months previous suggesting that people are buying even though the economy contracted for a third consecutive quarter.

On a positive note Imperial Tobacco Group added 1% to its value after announcing that it expected revenue to rise 4% this year as emerging markets and price increases offset stagnant demand.

With little domestic economic data the focus for today will remain on the Spanish Bond Auction later this morning followed by US Initial Jobless Claims and the Philadelphia Fed Survey this afternoon.