Market update: China’s curbs on property market cause market jitters

Wall Street finished in mildly positive territory last Friday (S&P 500 +0.2%; Dow Jones +0.3%) as strong US data releases overshadowed mixed European purchasing managers indices and fears about the US ‘sequester’ – US$85bn in budget spending cuts that began kicking in on the day. The pace of growth in US manufacturing as measured by the Institute for Supply Management index rose at its fastest rate for nearly two years in February, up to 54.2 from 53.1 in January (a number above 50 indicates expansion). Separately, the Reuters/University of Michigan index of consumer sentiment increased to 77.6 in February, beating analysts’ consensus forecasts.

UK and European markets have opened lower this morning (FTSE 100 -0.3%; FTSE Eurofirst 300 -0.3%) following losses in Asian markets overnight. Stocks have been reacting to news from China that the State Council has announced an increase in downpayments and loan rates for buyers of second homes in certain fast-growing cities. Continuing political uncertainty in Italy is also cited as being behind the markets’ nervousness. At the sector level, banks are moving lower after HSBC’s results fell short of expectations, the company revealing a 6% drop in pre-tax profits. Today's economic releases include the UK construction PMI, along with the euro area producer price index (PPI).