Europe open: Equities drop following weak Chinese manufacturing data

European stocks fell on Tuesday, kicking the new month off on a downbeat note as weak Chinese manufacturing data exacerbated concerns of a slowdown in the world’s second-largest economy.

At 0840 BST, the benchmark Stoxx Europe 600 index was down 1.6%, France’s CAC 40 was 1.5% weaker and Germany’s DAX was down 1.9%. In terms of sector, basic resources – which are highly dependent on demand from China – suffered heavy losses, with the Stoxx 600 sub-index down 1.9%.

The official Chinese manufacturing sector purchasing managers' index fell to a three-year low of 49.7 in August from a print of 50 the month before, while the Caixin China manufacturing PMI hit a six-and-a-half year low of 47.3.

“This first sub-50 official PMI reading in six months is consistent with the declining Caixin PMI and points to weakening growth momentum in August,” said Nomura. “We expect policy to remain accommodative, with additional fiscal stimulus efforts in H2 to boost infrastructure investment and one more 50 basis points reserve requirement ratio cut in Q4.”

The Shanghai Composite index and the Hang Seng both fell 1.2%, while the Nikkei slumped 3.8%.

Although the figures were pretty much in line with expectations, they merely served to compound worries that the Chinese economy is running out of steam.

“Another batch of weak economic data out of China solidified fears that the production lines in China’s factories are coming to a shuddering halt. With traders now completely losing faith in the once miraculous growth story of the Asian behemoth, it’s a question of whether China has a slow contraction or does a swan dive off the economic cliff,” said Jonathan Sudaria, night dealer at London Capital Group.

On the corporate front, shares in Man Group slumped following a press report that the chairman of the hedge fund manager’s China unit, Li Yifei, has been taken into custody by Chinese authorities to assist with a police probe into market volatility.

Swiss pharmaceutical company Novartis fell into the red despite saying it has received approval from European regulators for the combination of tafinlar and mekinist for the treatment of an aggressive type of skin cancer.