Europe close: Weak global factory data weighs on stocks

European stocks started the month of September on a mixed note, with miners providing support as investors digested some mixed Chinese data and a poor reading on US manufacturing ahead of a key report on the state of America´s jobs market due the next day.

The benchmark Stoxx Europe 600 index edged higher by 0.04%, Germany’s DAX was 0.55% lower and France’s CAC 40 was up 0.03%. In terms of sectors, the Stoxx 600 basic resources index was up 0.88% as metals prices bounced back in most cases.

Weaker than expected factory data Stateside cut short a rally in crude oil futures from the previous session’s losses. West Texas Intermediate was down 2.76% at $43.50 a barrel and Brent crude was down 2.63% to $45.69.

“September, officially one of the worst months for stock markets, begins with a bang this year,” said Lee Wild, heady of equity strategy at Interactive Investor.

“Friday's US jobs report is the first piece of major data, and its significance cannot be understated. A higher number will likely trigger an increase in US interest rates in three weeks' time, the first since December, putting equity markets under pressure.
Stocks have already struggled this week as traders take money off the table, just in case there’s a nasty surprise. And that’s probably wise given the unpredictable nature of August payrolls. Talk is that 200,000 or more makes higher rates this month a dead cert.”

An official survey in China showed factory activity in the world’s second-largest economy grew at its fastest rate in nearly two years last month.

The official purchasing managers’ index rose to 50.4 in August from 49.9 in July, marking its best level since October 2014. It was also ahead of economists’ expectations for an unchanged reading.

However, the Markit/Caixin PMI fell to 50 in August from 50.6 in July, missing expectations for a reading of 50.1.

Finally, the official services PMI declined to 53.5 from 53.9 the month before.

Back in Europe, Markit’s final eurozone manufacturing purchasing managers’ index came in at 51.7 in August, marking a three-month low.

This was down from the flash estimate of 51.8 and July’s reading of 52.0.

Still, the PMI has now signalled growth for 38 consecutive months, marking a continuation of its survey-record unbroken sequence above the 50.0 stagnation mark.

Chris Williamson, chief business economist at IHS Markit said: “Eurozone manufacturers reported a wavering performance in August, with signs that growth could slow further in coming months. The rate of expansion dipped to a three-month low but is at least holding up in the face of the uncertainty caused by the UK’s vote to leave the EU. The survey indicates that factory production is growing at a steady though unexciting annual rate of just under 2%.

“There is some suggestion of a Brexit impact, however, and growth may wane further in September after new orders growth slipped to a one-and-a-half year low.”

The news Stateside was worse, with the equivalent ISM PMI retreating from a reading of 52.6 in July to 49.4 in August (Consensus: 52.0). Data on construction spending for July and second quarter unit labour costs were also worse than anticipated.

In corporate news, distiller Pernod Ricard racked up healthy gains as it posted a rise in full-year profit but said sales of its two largest brands dropped.

Shares in Roche slipped after the Swiss drug maker said its cancer immunotherapy Tecentriq extends survival in lung cancer.

Radiation therapy equipment maker Elekta rallied as its first-quarter core profit beat analysts’ expectations.

FTSE 250 recruiter Hays was in the red despite reporting a rise in profit for the year to the end of June as net fee income grew.
The company said it was too early to gauge how Brexit will affect the business.