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Boost from Chinese stimulus measures fades quickly

Stock markets on Tuesday couldn’t hold on to gains made at the start of the week following stimulus measures announced by China last week and a deal reached by indebted Chinese property developer Country Garden over the weekend. Stock markets were in the red in early Tuesday trading, dragged down by China’s lowest services Purchasing Managers’ Index (PMI) since reopening its economy this year.

Shane Strowmatt, LGT
Reading time
5 minutes
Chinese market
© Shutterstock

In Asia, stock markets on Tuesday were reversing gains made at the start of the week after the Chinese service sector logged the slowest expansion in eight months. The services PMI came in at 51.8 points in August, down from 54.1 in July, and the lowest level since December. Hong Kong's Hang Seng Index fell 1.4% and the Shanghai Composite was trading 0.7% lower early Tuesday. Shares in Country Garden were down around 2% on Tuesday after gaining nearly 15% on Monday. The crisis-ridden property developer received approval over the weekend from its creditors push back a bond repayment date, buying it time to fix its finances.

Elsewhere in Asia, Tokyo’s Nikkei 225 was the only major Asia stock index marginally in positive territory after Japan’s service sector activity posted the fastest expansion in three months at 54.3 in August. In South Korea, the Kospi was trading slightly lower. In Australia, the S&P/ASX 200 was down 0.3% after the Reserve Bank of Australia announced it will keep interest rates unchanged with its benchmark rate at 4.1%.

On Monday, more weak economic data was released in Europe. Switzerland’s adjusted gross domestic product (GDP) came in flat during the second quarter of 2023, following a strong expansion of 0.9% in the first quarter. An expansion in most services sectors wasn’t able to counteract a contraction of 2.9% in manufacturing during the second quarter. A 2.3% decline in the chemical and pharmaceutical industries was a major component of the weak industrial result. The primary reason for the drop in manufacturing was the challenging international environment, according to the State Secretariat for Economic Affairs (SECO). Prior to the second-quarter GDP data, the Swiss economy had seemed immune to the poor economic sentiment coming from parts of the euro area and particularly Germany. On Monday, Germany reported a falling trade surplus, which narrowed to EUR 15.9 billion in July, down from EUR 18.7 billion a month earlier. The Swiss Market Index ended Monday’s session down 0.2% while Germany’s DAX finished the day down about 0.1%.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Services Purchasing Managers’ Indices from several countries throughout the day, European Central Bank President Christine Lagarde speaks at ECB Legal Conference (09:00 am), eurozone producer prices (11:00 am).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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