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The stock markets in Asia and Europe experienced a decline on Tuesday due to China’s record-breaking drop in exports, igniting concerns over its economic growth.
In Europe, the Stoxx Europe 600 index dropped by 0.2% within the first hour of trading. Investors were taken aback by Italy’s proposal for a windfall tax on banks, resulting in a negative market sentiment.
Shares of Italian bank Intesa Sanpaolo tumbled by 6.9% as the country’s deputy prime minister announced a 40% windfall tax on banks that have profited from rising interest rates. UniCredit also suffered a decline of 5.7%.
The Hang Seng index in Hong Kong experienced a 1.7% drop, mainly driven by declines in consumer goods and property. China’s benchmark CSI 300 also declined by 0.3%.
These market movements were triggered by China’s release of official data, revealing a 14.5% year-on-year decline in exports for July, the largest drop since February 2020. Imports also fell by 12.4%, surpassing the 5% decline predicted by economists in a Reuters poll.
The global and domestic decrease in demand for goods, coupled with challenges in the weak property sector, have been dragging down China’s economy. Despite easing pandemic restrictions earlier this year, the country is struggling to regain momentum.
The discouraging trade figures reinforce expectations of a further slowdown in China’s economic activity during the third quarter. Policymakers are now under pressure to introduce new stimulus measures.
Furthermore, the renminbi weakened by 0.3% and traded at Rmb7.2192 against the dollar, reaching its lowest level since mid-July.
Investors are now anticipating the release of China’s inflation figures on Wednesday. It is expected that there will be a 0.4% deflation in July after prices remained stagnant in the previous month.
On Thursday, attention will shift to the US, where the consumer price index will be revealed. The US has been struggling to combat high inflation, which led to the Federal Reserve raising interest rates to their highest point in 22 years.
Prior to the opening of the New York market, contracts tracking the S&P 500 showed a 0.4% decrease, while those tracking the tech-focused Nasdaq 100 declined by 0.5%.
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