European stock markets drop, Shanghai extends gains

European stock markets dropped on Wednesday as traders reacted to more mixed earnings and weak German data, while Shanghai extended a rally on measures aimed at supporting China’s ailing economy.

Analysts said sentiment was hit also by expectations that the Federal Reserve was unlikely to cut US interest rates as soon as March, as inflation stays high.

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In Europe, official data Wednesday showed industrial production in Germany fell for a seventh straight month in December, capping a year of manufacturing weakness in Europe’s largest economy.

Frankfurt’s DAX index was down 0.3 percent in midday trading, while Paris and London were also lower.

In Asia, announcements this week out of Beijing continued to light a fire under equities in Shanghai, though Hong Kong succumbed to profit taking.

Observers warned that Chinese measures aimed at shoring up its economy would not be enough to revive confidence among weary investors, adding that much more need was needed to address a property-sector debt crisis.

Saxo Capital Markets’ Charu Chanana said “the effect may be temporary as all these are band-aid measures that cannot fix the structural issues that China is facing from property sector to lack of productivity”.

Central Huijin Investment — the unit that holds Chinese government stakes in major financial institutions — said it would increase investments in funds.

China’s Securities Regulatory Commission meanwhile called on listed firms to ramp up share buybacks, a move that typically boosts stock prices.

Following this, Chinese state media on Wednesday reported that Beijing had removed the head of the CSRC.

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Elsewhere on markets, Wall Street chalked up small gains Tuesday thanks to healthy corporate results, including from Spotify and data analytics firm Palantir, whose share price soared more than 30 percent on optimism over its artificial intelligence offerings.

In Europe, TotalEnergies on Wednesday reported record-high annual profit, underpinned by performances in its liquefied natural gas and electricity divisions as the French giant continues to invest heavily in fossil fuel production.

Net profit came in at $21.4 billion for 2023, up four percent on a year earlier.

TotalEnergies’ share price slid 3.0 percent, however, with the profit total falling short of market expectations.

Investors globally remain on edge over a range of other issues, including wars in Ukraine and the Middle East and China-US tensions.

“We saw some turbulence in January, and we aren’t out of the woods with inflation yet. So, while the trends remain positive, risks could increase over the next couple of months,” said Brad McMillan at broker Commonwealth Financial Network.

– Key figures around 1145 GMT –

London – FTSE 100: DOWN 0.3 percent at 7,655.64 points

Paris – CAC 40: DOWN 0.1 percent at 7,629.97

Frankfurt – DAX: DOWN 0.3 percent at 16,988.26

EURO STOXX 50: DOWN 0.1 percent at 4,684.60

Tokyo – Nikkei 225: DOWN 0.1 percent at 36,119.92 (close)

Hong Kong – Hang Seng Index: DOWN 0.3 percent at 16,081.89 (close)

Shanghai – Composite: UP 1.4 percent at 2,829.70 (close)

New York – Dow: UP 0.4 percent at 38,521.36 (close)

Euro/dollar: UP at $1.0769 from $1.0758 on Tuesday

Dollar/yen: UP at 148.02 yen from 147.91 yen

Pound/dollar: UP at $1.2634 from $1.2600

Euro/pound: DOWN at 85.26 pence from 85.36 pence

Brent North Sea Crude: UP 0.9 percent at $79.32 per barrel

West Texas Intermediate: UP 0.6 percent at $73.77 per barrel

© Agence France-Presse