Europe open: Basic resources pace the decline as China data disappoints

European stocks fell in early trade, with basic resources pacing the decline following disappointing data in China.

At 0900 GMT, the benchmark Stoxx Europe 600 index was down 1.1%, Germany’s DAX was down 1.3% and France’s CAC was 1.5% weaker.

“European equity markets are under pressure in early trade. Investors have been rattled by the release of China’s latest trade surplus which showed a sharp decline. The fall in both exports and imports was far bigger than expected,” said David Morrison, market analyst at SpreadCo.

“We’ve got used to weak Chinese data boosting risk appetite as investors look forward to further stimulus of one form or another. However, the current stock market rally looks due a pull-back, even if it’s just to book profits and trim exposure ahead of this and next week’s central bank meetings. Last night Federal Reserve vice-chair Stanley Fischer took some of the wind out of the market’s sails when he suggested that the 'first stirrings of higher inflation' were evident. This was interpreted as leaving open the slimmest of chances for a Fed rate hike next Thursday.”

Investors were likely wary ahead of Thursday’s European Central Bank rate announcement, as they look for further clues on monetary policy.

Basic resources were the worst performers after data showed China’s trade performance last month was much worse than economists had been expecting, with exports and imports down more than forecast.

Exports fell 25.4% from the previous year to $126.1bn, compared with January’s 11.2% contraction. Imports, meanwhile, were down 13.8% to $93.5bn, compared with an 18.8% drop the previous month.

The Stoxx 600 basic resources index, which is highly dependent on demand from China, slumped nearly 4%.

Oil prices also retreated, with West Texas Intermediate down 0.8% to $37.59 a barrel and Brent crude down 0.9% at $40.49.

On the corporate front, Casino was in the red after US research firm Muddy Waters put out another scathing note on the French supermarket retailer.

Payment processor Worldpay, which listed on the London Stock Exchange last year, was under the cosh despite saying it swung to a pre-tax profit of £19.1m in 2015 compared with a £47.1m loss the previous year.

On the upside, shares in advertising agency WPP were higher after it put out a brief update in response to demand from investors and analysts saying like-for-like revenue and net sales growth were both “well over 3%” in February.

Luxury goods brand Burberry was a high riser following a press report it was seeking help to fight off a takeover bid.

Data released earlier by the Economy Ministry showed German industrial production rose the most in more than six years in January, underpinned by strong domestic demand.

Adjusted for seasonal swings, industrial production rose 3.3% from the previous month following a 0.3% drop in December, beating economists’ expectations of a 0.5% increase. On the year, industrial production was up 2.2%, also beating forecasts.

Pantheon Macroeconomics said the data was “extraordinary”.

“A very strong report with a surging headline, and upward revisions to the December data. Production was boosted by strong increases in capital and consumer goods production, rising 5.3% and 3.7% respectively month-to-month.

“The stand-out detail, however, was the 7.0% month-to-month surge in construction. This likely was partly due to continuing warm weather, but it was also a result of base effects indicating that even a big monthly jump would only be consistent with a stable or slightly rising year-over-year rate,” Pantheon said.

Still to come on the macroeconomic front, the final release of fourth quarter Eurozone GDP is due at 1000 GMT.