European and Asian stocks fall on weak Chinese export data

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Stocks retreated in Asia and Europe on Tuesday after new data showed China’s exports fell by the most since the beginning of the Covid-19 pandemic, amplifying concerns over the country’s economic growth.

Europe’s region-wide Stoxx Europe 600 index fell 0.2 per cent in the first hour of trading, after Italy stunned investors with plans for a windfall tax on banks.

Italian lender Intesa Sanpaolo was among the top decliners, down 6.9 per cent, after the country’s deputy prime minister announced a 40 per cent windfall tax on banks that have recently profited from rising interest rates. UniCredit fell 5.7 per cent.

Hong Kong’s Hang Seng index dropped 1.7 per cent, led by declines in consumer goods and property, while China’s benchmark CSI 300 was down 0.3 per cent. 

The moves came after official data showed China’s exports declined 14.5 per cent year on year in July, the most since February 2020. The country’s imports fell 12.4 per cent, much higher than the 5 per cent decline forecast in a Reuters poll of economists.

A slowdown in global and domestic demand for goods weighed on the world’s second-largest economy, which also grappled with a weak property sector. China has struggled to regain momentum after ending three years of severe pandemic restrictions earlier this year.

The bleak trade numbers on Tuesday reinforced expectations that China’s sluggish economic activity would slow further in the third quarter, adding pressure on policymakers to enact new stimulus measures.

The renminbi weakened 0.3 per cent to trade at Rmb7.2192 a dollar, its weakest level since mid-July.

Investor attention turns to China’s inflation figures coming out on Wednesday, with expectations of 0.4 per cent deflation in July after prices were stagnant in the previous month.

The reading will be followed on Thursday by the consumer price index from the US, which has been struggling to cool prices. High inflation prompted the Federal Reserve to take interest rates to their highest level in 22 years.

Contracts tracking Wall Street’s benchmark S&P 500 lost 0.4 per cent, while those tracking the tech-focused Nasdaq 100 declined 0.5 per cent ahead of the New York open.