Global stocks fall as muted China services data saps investor optimism

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Chinese and European stocks fell on Tuesday as a downbeat business survey from China halted a rally fuelled by a property stimulus from Beijing.

Europe’s region-wide Stoxx 600 fell 0.5 per cent, extending losses into the fifth successive trading session, while France’s Cac 40 dropped 0.8 per cent and Germany’s Dax gave up 0.7 per cent. 

In China, the benchmark CSI 300 declined 0.7 per cent and Hong Kong’s Hang Seng was down 2 per cent, erasing most of the gains both indices made a day earlier after news of fresh government support for the property sector.

Monday’s rally gave way to rekindled anxiety over the health of the world’s second-largest economy, after private survey data showed that service sector activity in August declined to its slowest rate since Xi Jinping’s coronavirus controls were lifted at the start of the year. 

The Caixin services purchasing managers’ index came in at an eight-month low of 51.8 last month, down from 54.1 in July and below the 53.6 forecast of economists polled by Reuters. The reading approached the neutral 50-mark which separates expectation from contraction. 

The shares of China’s troubled developer Country Garden fell 1 per cent, paring larger losses from earlier in the day, after the company narrowly avoided a default by making late payments on two dollar bonds within their grace periods. 

The developer, which some investors see as a gauge for the health of China’s once-dominant property sector, initially missed those payments in early August and was granted a grace period that had been set to expire this week. 

The Hang Seng Mainland Properties index declined 3.2 per cent on Tuesday, a day after Beijing vowed to extend greater support to the property sector, which has struggled from weak demand since the country reopened from three years of strict pandemic lockdowns.

Over the weekend, the government encouraged lenders to cut interest rates on existing mortgages and introduced policies that would allow a dozen of China’s largest cities to reduce downpayments for homebuyers.

Yet some analysts noted that while these measures could prop up the struggling property sector, they were less likely to bolster broader consumer confidence in China. 

“The likely cuts to existing mortgage rates should leave more money in the hands of relatively wealthy urban households, but they probably won’t spend much of that while they are worried about the economic outlook”, said Duncan Wrigley, chief China economist at Pantheon Macroeconomics. 

Elsewhere in the region, Japan’s benchmark Topix index rose 0.2 per cent and South Korea’s Kospi fell 0.1 per cent.

Australia’s S&P/ASX 200 was flat, after the Reserve Bank of Australia kept interest rates steady as expected, but noted that further tightening could be required. 

Futures contracts tracking Wall Street’s benchmark S&P 500 and those tracking the tech-focused Nasdaq 100 declined 0.2 per cent, as US markets prepared to reopen after a holiday.