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European and Asian stock markets diverged Friday ahead of a Chinese fiscal policy briefing this weekend which investors hope will bring more measures to boost the world’s second-largest economy.
Shanghai’s stock market closed more than two percent lower after a week dominated by concerns over a lack of detail on the scale of China’s recent batch of stimulus measures.
Focus is now on Saturday’s briefing at which Finance Minister Lan Fo’an is to set out fiscal policy.
“The stakes are high — most observers agree that recent stimulus announcements won’t amount to much unless backed up by fiscal support,” said Julian Evans-Pritchard, head of China economics at Capital Economics, in a note.
“Three factors will be key in determining the impact of stimulus: its scale, where it’s channelled, and how soon it’s deployed,” he said.
In Europe, London’s top-tier FTSE 100 index edged down even as data showed the UK economy rebounded in August after stagnating for two months.
The data, in line with economists expectations, comes ahead of the new Labour government’s maiden budget later in October which is set to include tax rises and spending cuts.
Shares in supermarket giant Sainsbury’s fell around five percent, making it the biggest faller on the FTSE on Friday. The drop follows reports that its biggest shareholder, Qatar Investment Authority, had sold off a large chunk of its shares, analysts said.
Paris and Frankfurt stock markets both rose, with eurozone investors hoping the European Central Bank will make its third interest rate cut of the year next week.
Across the Atlantic, expectations of another bumper US Federal Reserve interest-rate cut were dampened by disappointing inflation data published Thursday.
Wall Street fell following the report that US consumer prices cooled less than expected in September, pulling back big gains made on last Friday’s blockbuster jobs data.
“Somewhat higher-than-expected inflation in September has eliminated market expectations of anything more than a 25 basis point interest rate reduction at the Fed’s November meeting,” said market strategist Patrick Munnelly at traders Tickmill Group.
Tokyo rose on a weaker yen as investors scale back expectations for US rate cuts.
Elsewhere, oil fell one percent after having surged more than three percent Thursday following the Israeli defence minister’s pledge that his country would strike Iran in retaliation for last week’s missile attack.
– Key figures around 1100 GMT –
London – FTSE 100: DOWN 0.2 percent at 8,224.49 points
Paris – CAC 40: UP 0.1 percent at 7,546.88
Frankfurt – DAX: UP 0.1 percent at 19,235.88
Tokyo – Nikkei 225: UP 0.6 percent at 39,605.80 (close)
Shanghai – Composite: DOWN 2.6 percent at 3,217.74 (close)
Hong Kong – Hang Seng Index: Closed for holiday
New York – Dow: DOWN 0.1 percent at 42,454.12 (close)
Euro/dollar: DOWN at $1.0933 from $1.0935 on Thursday
Pound/dollar: UP at $1.3060 from $1.3058
Dollar/yen: UP at 149.10 yen from 148.58 yen
Euro/pound: UP at 84.00 pence from 83.73 pence
West Texas Intermediate: DOWN 1.0 percent at $75.11 per barrel
Brent North Sea Crude: DOWN 1.0 percent at $78.62 per barrel
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