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European Shares Seen Lower As China Factory Deflation Deepens

markets 111714 10sep19

European stocks look set to open a tad lower on Tuesday after data showed
China's factory-gate prices shrank at their fastest pace in three years in August, falling deeper into deflationary territory amid flagging demand at home and abroad.

The producer price index fell an annual 0.8 percent in August, suggesting that further monetary easing is on the horizon. China's consumer price index rose 2.8 percent from a year earlier, unchanged from that in July.

Asian stocks remain mostly lower and the U.S. dollar edged lower against its peers while German bond yields rebounded from record lows to hit one-month highs after reports that Berlin is considering taking on more debt to boost spending.

Gold prices hovered near a four-week low, while oil prices rose on expectations that OPEC and other countries may agree to extend production cuts ahead of a meeting in Abu Dhabi this week.

The British pound held firm after British Prime Minister Boris Johnson again failed to get MPs to back a snap election.

Meanwhile, ahead of Thursday's European Central Bank meeting, investors remain convinced the central bank would introduce a stimulus package that includes a rate cut to boost growth amid the ongoing U.S.-Sino trade war.

Analysts, however, remain divided over whether the ECB will opt for a massive extension of bond purchases known as quantitative easing.

The Federal Reserve will continue to act "as appropriate" to sustain the U.S. economic expansion, Fed Chair Jerome Powell said Friday in Zurich, bolstering expectations for a rate cut at the Fed's meeting on Sept. 18.

Labor market statistics from the U.K. and industrial production from France are due later in the session, headlining a light day for the European economic news.

Overnight, U.S. stocks ended narrowly mixed as investors looked ahead to central bank meetings.

While the Dow Jones Industrial Average inched up 0.1 percent to reach its best closing level in over a month, the tech-heavy Nasdaq slid 0.2 percent and the S&P 500 edged down marginally.

European markets ended Monday's session mostly lower after the release of weak Chinese data and ahead of Thursday's ECB meeting.

The pan European Stoxx 600 gave up 0.3 percent. The German DAX rose 0.3 percent after a surprise rise in German exports, while France's CAC 40 index eased 0.3 percent and the U.K.'s FTSE 100 declined 0.6 percent.

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