Europe midday: Stocks weaker amid China growth worries

European stocks were still in the red by midday on Monday as investors fretted about China’s growth prospects.

The benchmark Stoxx 600 index and Germany’s DAX were down 0.6%, while France’s CAC 40 was 0.5% lower.

Richard Hunter, head of markets at Interactive Investor, said: "Investors paused for breath after an exhausting few days and ahead of a long weekend, with each of the main indices dipping slightly but finishing in positive territory for the week.

"Asian markets kicked off the week in subdued fashion, as investors erred on the side of caution after the previous breathless week. The Nikkei index came off the recent highs achieved on Friday, when the Bank of Japan’s decision to leave its accommodative monetary policy intact led to more buying interest, However, the current centre of investor concerns continues to be China, where hopes are still increasing for stimulative intervention by the authorities, although the lack of any announcements last week resulted in a wave of disappointment.

"The People’s Bank of China is largely expected to cut prime loan interest rates tomorrow, which would add to a reduction last week in the medium-term loan rates. At the same time, growth projections are being cut across the region, as the initial optimism from an earlier year economic bounce following reopening have faded fast. The more recent economic data have pointed to blockages in the property market, while the consumer and youth unemployment are also giving cause for concern."

The latest Chinese GDP projections from Goldman Sachs added to the downbeat mood, as the bank cut its growth forecasts. It argued that after a strong start in the first quarter, the country’s post-reopening recovery "appears to have fizzled out in Q2" and that government stimulus won’t be enough.

GS downgraded its 2023 full-year real GDP growth forecast to 5.4% from 6.0% and its 2024 forecast to 4.5% from 4.6%.

"Although contact-intensive services sectors continued to heal, May activity data show that the property market, the largest sector in the economy, weakened again," it noted. "Property investment growth declined to -10% year-on-year and property-related products underperformed in detailed industrial production and retail sales data.

"With no ‘easy fix’ on the horizon, the property market’s weakness and its negative impact on the rest of the economy is likely to persist."

Goldman said policymakers face constraints and the upcoming policy easing will not be as large and forceful as during the 2008-09, 2015-16 and 2020 cycles.

Amid worries about China, the Stoxx 600 basic resources index fell 1.3% to 575.48.

Elsewhere, Sartorius tumbled more than 15% after the Franco-German lab equipment maker cut its outlook for 2023.