European equities sank yesterday, mirroring falls across Asia after China reduced its growth target, with a dip in eurozone business activity also dampening sentiment.
London’s benchmark FTSE 100 index closed down 0.62 per cent to 5,874.82 points. In Frankfurt, the DAX 30 dipped by 0.79 per cent to 6,866.46 points and in Paris the CAC 40 fell 0.39 per cent to 3,487.54 points.
Elsewhere in Europe, Madrid fell by 1.26 per cent, Lisbon 0.43 per cent, Amsterdam 0.67 per cent, Milan 0.68 per cent and Brussels 0.60 per cent. Zurich edged up 0.07 per cent.
The European single currency rose to $1.3230 from $1.3196 late in New York on Friday. The dollar fell to 81.42 yen from 81.78 yen on Friday.
US stocks were also lower at midday trade with the Dow Jones Industrial Average down 0.61 per cent to 12,898.10 points. The broad-based S&P 500 shed 0.58 per cent to 1,361.66 points, while the tech-rich Nasdaq Composite dropped 0.95 per cent to 2,947.84 points.
“Without further ado, China announced a 7.5 per cent GDP growth target for 2012 at its annual parliamentary meeting that is below the eight per cent-plus target the world has grown accustomed to seeing and hearing from China,” said Patrick O’Hare at Briefing.com.
“The tempered growth outlook from China has provided a good excuse to do some profit taking along with the lingering concerns pertaining to Greece’s debt swap, geopolitical tensions surrounding Iran, and the idea that equity markets are poised for a consolidation period after the strong start to the year.”
Chinese Premier Wen Jiabao said yesterday that the country was targeting growth of 7.5 per cent in 2012, a third straight reduction as the world’s number two economy is buffeted by ongoing troubles in the West and high oil prices.
Mr Wen’s growth target, announced as he opened the annual session of the National People’s Congress (NPC), follows expansion of 9.2 per cent last year and 10.4 per cent in 2010. The “slightly lower” target was aimed at “accelerating the transformation of the pattern of economic development” as Beijing seeks to reduce its reliance on exports to drive growth with key US and European markets continuing to stumble.
While dealers took in Wen’s comments they were also eyeing a string of announcements this week, including interest rate announcements from the Bank of England and the European Central Bank on Thursday.
However, the crucial day is Friday with the release of US non-farm payrolls, which will give an indication of the state of recovery in the world’s number one economy following several months of steady growth.
In Europe, the week kicked off with eurozone private sector activity falling in February after returning to growth in January underlining predictions of recession.
The composite purchasing managers’ index (PMI) for services and industry compiled by the research firm Markit fell to 49.3 points in February from 50.4 points in January but was still up from 48.3 points in December.
Any score above 50 points indicates growth, while a score below indicates contraction.
Meanwhile, the deadline for Greece’s private creditors to write down their debt comes up on Thursday, with leaders hoping to cut 107 billion euros from the country’s bill.
A dozen major holders of Greek debt, including banks BNP Paribas and Commerzbank, have accepted the plan, the Institute of International Finance said on Monday.
If the take-up appears on course, eurozone finance ministers will open the purse strings on an associated new financial lifeline for Athens worth 130 billion euros.
Asian deals were hit by the China growth decision. Hong Kong shed 1.38 per cent, Tokyo fell 0.80 per cent, Shanghai slipped 0.64 per cent and Sydney dropped 0.24 per cent.