European stock markets traded lower on Tuesday, influenced by concerns about the Chinese economy ahead of the release of final business activity data for the region. At 03:25 ET (07:25 GMT), Germany’s DAX index was down 0.5%, the UK’s FTSE 100 index fell 0.6%, and France’s CAC 40 index declined by 0.8%.

Weak Chinese data affects global sentiment

On Tuesday, sentiment was affected by the release of a private-sector survey showing that Chinese service sector activity in August expanded at its slowest pace in eight months. Expectations for the August Caixin services purchasing managers’ index (PMI) were 51.8, lower than the expected 53.6, and July’s reading of 54.1.

This disappointment countered some of the optimism observed on Monday after developer Country Garden obtained bondholders’ consent to extend some debt maturities, averting a potential default.

China is an important market for Europe’s largest companies, and the slowdown in China’s economic growth has impacted their financial results.

Eurozone Services Data Likely to Disappoint

Back in Europe, Spain’s PMI for services unexpectedly contracted in August, dropping to 49.3 from the previous month’s reading of 52.8. Similar data from across Europe is likely to paint a similarly gloomy picture of the developing regional economy.

A series of weak data from the Eurozone, particularly from Germany, the largest European economy and the main growth driver of the region, has increased the likelihood that the European Central Bank (ECB) will pause its interest rate hikes later this month.

ECB President Christine Lagarde is set to speak later today, and her comments will be closely monitored for hints about the central bank’s next steps.

“For central banks, it will be crucial to keep inflation expectations firmly anchored as these relative price changes unfold,” Lagarde said on Monday, referring to price fluctuations caused by labor and energy market changes and geopolitical disruptions.

Source: Investing.com