European Markets Drop On Weak Manufacturing Data

(RTTNews) - The European markets got off to a positive start Monday, but reversed direction around mid-morning following the release of disappointing British manufacturing data. British manufacturing activity tumbled to its lowest level since 2013 in the wake of the U.K.'s decision to exit the European Union. The markets remained in negative territory for the remainder of the session.

The bank stocks were a source of early strength, following the release of the EU stress tests. The results showed that the resilience of the euro area banking system improved since the last tests in 2014. However, those early gains eroded when the markets reversed. Italy's troubled lender Monte dei Paschi di Siena, Austria's Raiffeisen, Allied Irish Banks and Spain's Banco Popular were among the banks that fared worst in EU stress tests.

The Bank of England's monetary policy decision is due on Thursday and expectations are that it will expand its quantitative easing program while publishing alongside the latest inflation report and growth forecasts.

The pan-European Stoxx Europe 600 index slipped 0.54 percent. The Euro Stoxx 50 index of eurozone blue chip stocks decreased 0.78 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.60 percent.

The DAX of Germany dropped 0.07 percent and the CAC 40 of France fell 0.69 percent. The FTSE 100 of the U.K. declined 0.45 percent and the SMI of Switzerland was closed for a holiday.

In Frankfurt, Deutsche Bank dropped 1.75 percent and Commerzbank fell 1.98 percent.

RWE weakened by 3.77 percent and E.ON surrendered 2.23 percent.

In Paris, Air Liquide tumbled 2.42 percent. The industrial gas company reported a drop in first-half profit in the face of depressed demand conditions for gas installations at factories and refineries.

Water and waste utility Veolia Environnement rose 0.15 percent after affirming its FY16 outlook.

Societe Generale sank 3.67 percent and BNP Paribas lost 1.49 percent. Credit Agricole also finished lower by 1.43 percent.

In London, oil services firm Petrofac climbed 0.67 percent after saying its independent investigation into allegations of bribery by Monaco-based oil contractor Unaoil SAM found no evidence of its involvement.

Pharmaceutical giant GlaxoSmithKline gained 0.74 percent after announcing a joint venture with a unit of Google's parent to develop and commercialize bioelectronics medicines.

Barclays declined 2.04 percent and Royal Bank of Scotland weakened by 1.72 percent. HSBC decreased 1.22 percent.

Heineken dropped 3.68 percent in Amsterdam after warning of increasing currency headwinds and "tough comparatives" in the second half.

Monte dei Paschi, which fared the worst in EU stress tests, rose 0.58 percent in Milan while Unicredit sank 9.40 percent.

Eurozone manufacturing activity grew at a slower pace in July, but the pace of expansion was faster than the initial estimate, final data from Markit showed Monday. The factory Purchasing Managers' Index fell to 52.0 in July from a 6-month high of 52.8 in June. The flash reading for July was 51.9.

The "Brexit" uncertainty hurt the U.K. manufacturing sector more-than-initially expected in July, leading to the worst fall in more than three years, signaling a weak start to the third quarter.

The final Purchasing Managers' Index for the factory sector plunged to 48.2 from 52.4 in June, marking its lowest level since February 2013, survey data from Markit showed Monday. A flash estimate for the index was 49.1.

China's manufacturing sector expanded for the first time since February 2015 as output, new orders and buying activity returned to growth, the results of a private survey revealed Monday.

This was in contrast to the official Purchasing Managers' data that showed contraction in the factory sector due to floods and weak demand.

The Caixin factory Purchasing Managers' Index rose more-than-expected to 50.6 in July from 48.6 in June, Markit reported. The score exceeded the neutral 50 mark for the first time since February 2015 and was above the expected score of 48.9.

The official PMI dropped to 49.9 in July from 50 a month ago, according to the report released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing. The score was expected to remain unchanged at 50.0.

After reporting the strongest growth in U.S. manufacturing activity in over a year in the previous month, the Institute for Supply Management released a report on Monday showing that growth in the manufacturing sector slowed in the month of July.

The ISM said its purchasing managers index dipped to 52.6 in July from 53.2 in June, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to come in unchanged. Reflecting decreases in spending on both private and public construction, the Commerce Department released a report on Monday showing an unexpected drop in U.S. construction spending in the month of June.

The Commerce Department said construction fell by 0.6 percent to an annual rate of $1.134 trillion in June from a revised $1.141 trillion in May. The decrease came as a surprise to economists, who had expected spending to climb by 0.6 percent.