European stock markets drop after economic releases

The DAX index in Germany was down 0.3%, the CAC 40 in France slipped 0.5% and the FTSE 100 in the U.K. slid 0.12%

European stock markets retreated Monday as investors digested a series of regional economic releases as well as the differing performances of the major Asian indices.

At 07:05 GMT, the DAX index in Germany was down 0.3%, the CAC 40 in France slipped 0.5% and the FTSE 100 in the U.K. slid 0.12%.

The tepid start to the week comes after the benchmark pan-European Stoxx 600 index finished at a new record high on Friday, boosted by China’s announcement last week of a range of stimulus measures that aim to boost the world’s second-biggest economy, also a major export market for Europe’s major companies.

The major Chinese stock indices posted strong gains Monday, including Hong Kong’s Hang Seng index surging over 4%, after China's central bank late on Sunday said it would tell banks to reduce mortgage rates for existing home loans before October 31 - the latest in a slew of aggressive stimulus measures designed to support the country's struggling property market.

However, Japan’s Nikkei index declined nearly 5% as investors priced in the risk of higher interest rates under new Prime Minister Shigeru Ishiba - a long-time critic of the Bank of Japan's ultra-easy policies.

Furthermore, Japanese industrial production tumbled 3.3% on the month in August, while housing starts declined 5.1% on an annual basis.

Back in Europe, data released earlier Monday showed that the British economy grew by 0.5% in the second quarter, marginally below the preliminary estimate of 0.6% for GDP growth.

Compared with the second quarter of 2023, the economy grew by 0.7%, slower than economists' forecasts of a 0.9% rise.

German inflation data are due later in the session, and are expected to show prices in the eurozone’s biggest economy are increasing below the ECB’s 2% medium-term target.

The European Central Bank reduced interest rates earlier this month, and speculation is mounting that the central bank will ease monetary policy again in October as slowing growth combines with cooling inflation.