China woes threaten European open

Sluggish economic data from China is set to weigh on European shares a little at the open – stop us if you’ve heard this one before in the past few weeks.

Euro STOXX 50 futures are down 0.3% with FTSE futures down 0.44%, following declines in Asian stocks and currencies after data that showed China’s services activity expanded at the slowest pace in eight months in August.

Also in the mix were oil prices, after Brent touched its highest level this year on Monday, above USD 89 a barrel.

In company news, Novartis confirmed it plans to spin-off its generic medicines division on October 4, as it published half-year results for the division, showing net third-party sales of USD 4.8 billion in the first half of the year.

Elsewhere, the initial public offering (IPO) of Renault’s Ampere electric vehicle division could get a valuation of up to 10 billion euros (USD 10.8 billion), Chief Executive Luca de Meo told the Financial Times.

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Morning Bid Europe–China optimism dissipates after weak data

Investor sentiment on China remains fragile, with Monday’s wave of optimism giving way on Tuesday to rekindled worries about the world’s second-biggest economy, after the release of a new set of weak data.

The Caixin PMI showed on Tuesday that China’s services activity in August expanded at the slowest pace in eight months, with sluggish demand continuing to dog the economy while stimulus has so far failed to meaningfully revive consumption.

The data, broadly in line with the official services PMI released last week, dragged markets lower.

The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.75%, on course for its worst day since Aug. 25. Against a basket of currencies, the dollar was steady.

Investor attention fixed firmly on China’s largest private property developer, Country Garden. A person close to the company said it had made interest payments on two U.S. dollar bonds, due last month, just as a grace period was scheduled to end on Tuesday.

Country Garden on Friday won approval from onshore creditors to extend a private bond worth 3.9 billion yuan ($536 million).

The Reserve Bank of Australia kept interest rates steady as expected but said further tightening of monetary policy may be required. The Aussie AUD=D3 was down about 0.6%, little moved by the decision.

A whole range of data in the European hours will provide further clues on the region’s economy ahead of a European Central Bank policy meeting next week.

ECB President Christine Lagarde, noting price swings due to changes in the labour and energy markets as well as geopolitical turmoil, said on Monday: “It will be critical for central banks to keep inflation expectations firmly anchored while these relative price changes play out.”

The market is now leaning against a hike at the ECB’s September meeting, after a run of soft data.

In company news, Danish drugmaker Novo Nordisk NOVOb.CO launched its popular Wegovy weight-loss injections in the United Kingdom. Surging demand for the injections, and for its highly effective diabetes drug Ozempic, helped Novo to unseat LVMH LVMH.PA as Europe’s most valuable listed company on Friday, ending the French luxury group’s 2-1/2 year-long reign.