European markets close lower after China plunge

An employee stands near a glass wall above the main atrium of the London Stock Exchange Group headquarters. London’s benchmark FTSE 100 index ended down 0.37% at 6,526.29 points yesterday.

European stock markets closed lower yesterday after another plunge on China’s main index, and on the eve of a German parliament vote on Greece’s new bailout. London’s benchmark FTSE 100 index ended the day down 0.37% at 6,526.29 points. Frankfurt’s DAX 30 finished 0.22% lower at 10,915.92 points, while the CAC 40 in Paris shed 0.27% to 4,9971.25 compared with Monday’s close. Investors were warily “keeping tabs on Asian markets,” said Brenda Kelly, head analyst at the London Capital Group, after the Shanghai index sank 6.15% on broad worries over the slowing Chinese economy and the government’s commitment to prop up shares. “The Asian session’s Chinese volatility continued to weigh on the commodities, with Brent Crude at $48.50 per barrel and copper hitting fresh six year lows; this meant the FTSE’s oil and mining stocks returned to a uniform shade of red,” said Connor Campbell, an analyst with Spreadex. In Europe, official data showed that Britain’s annual inflation rate rose to 0.1% in July. Sterling climbed strongly against both the euro and dollar on the inflation statistics, which fuelled expectations of a rate hike from the Bank of England in the first half of next year. Markets are scrutinising inflation data — which has been kept low of late by falling energy and food prices — for an indication of when the Bank of England may start raising its key interest rate from the current record-low level of 0.50%. In reaction to yesterday’s figures, the British pound jumped to $1.5658 from $1.5586 on Monday. The euro fell to $1.1025 from $1.1078 late in New York on Monday. On Wall Street, US stocks were mixed yesterday following disappointing earnings from Wal-Mart and in response to the turbulence in Chinese equity market. In trading around noon in New York, the Dow Jones Industrial Average slipped 0.01% to 17,544.08 points. The broad-based S&P 500 gained 0.52% to 2,102.44 points, while the tech-rich Nasdaq Composite Index lost 0.27% to 5,078.05. The US Federal Reserve, meanwhile, is expected to start hiking its near-zero rate before the end of the year. Market concern was also turned toward Greece, on the eve of a German parliamentary vote to approve the new bailout for Athens. As Europe’s biggest economy and contributor to Greek aid, Germany plays a key role in the emergency package approved by eurozone finance ministers worth up to €86bn ($96bn). But with signs rising Chancellor Angela Merkel may encounter a conservative “rebellion during the Bundestag vote on the latest Greek deal,” Campbell says markets will take note of the scope of German dissent today.