European Markets Subdued
European shares stalled and core bond yields held near lows on Monday following disappointing data from China, while Greek markets were volatile as the government pursued efforts to reach a compromise with its creditors.
Some Greek bank stocks rebounded as much 22 percent as Greece’s leftist government began its drive to persuade a skeptical Europe to accept a new debt agreement. “Our base case remains that, eventually, some accommodation will be found between the new Greek government and Greece’s official creditors,” Goldman Sachs analysts wrote in a note, Reuters said.
“The market seems to be taking a view that while the risks of a Greek (eurozone) exit are rising (though not yet to the point where they become the central view), the ability to contain the impact on the rest of the market and avoid systemic spillovers is high.”
The pan-European FTS Eurofirst 300 was down 0.1 percent at 0922 GMT (4.22 a.m ET), little changed after data showed euro zone factory activity grew slightly last month as companies kept slashing prices – even as a weakened currency did little to help drive new orders from abroad.
Spain was a notable outlier, with its benchmark IBEX index down more than 1 percent despite Spain’s manufacturing sector expanding in January after years of on-off recession.
“The situation in Greece seems manageable from an investor’s point of view, given the size of the economy. But if the anti-austerity wave reaches Spain, that’s another story,” said Alexandre Baradez, chief market analyst at IG France. “That’s why people are trimming exposure to Spain this morning, despite the relatively good PMI figures.”
The Swiss franc hit a two-week low against the euro and the dollar on Monday, on talk that the Swiss National Bank was intervening to weaken the currency and on a report that it was targeting a new informal trading band.
Asian markets languished after downbeat Chinese factory sector data raised concerns about the world’s second-largest economy. The unexpected contraction of the PMI gauge was the first in nearly 2-1/2 years, and firms see more gloom ahead.
The weak data led to a bounce in some commodities markets, with Shanghai copper jumping nearly three percent on hopes for increased stimulus.
Brent crude fell by over $1 to $51.96 per barrel, with U.S. crude down at $47.20. Depressed oil prices also weighed on emerging markets.
The rouble weakened, with market players also still reacting negatively to the Russian central bank’s unexpected decision on Friday to cut rates.