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European stock markets subdued as China services sector shrinks

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·Contributor
·3-min read
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Staff members prepare meals for the customers at a restaurant in Zhengzhou, central China's Henan Province, Aug. 29, 2021. Zhengzhou started on Saturday to allow restaurants to resume dine-in service, while requiring them to conduct regular disinfection, shorten dining hours and provide serving chopsticks and spoons.   Customers and takeaway deliverymen are requested to undergo temperature and health codes scanning before entering restaurants.    Zhengzhou city cleared all its medium- and high-risk areas for COVID-19 on Saturday, with closed-management measures in affected areas lifted, reported the city authorities. (Photo by Li Jianan/Xinhua via Getty Images)
China’s service sector contracted last month, as the pandemic hit activity and demand. Photo: Li Jianan/Xinhua via Getty Images

European stock markets were muted on Friday after disappointing economic growth in Asia overnight.

In London, the FTSE 100 (^FTSE) was trading flat after opening, while the French CAC (^FCHI) tumbled 0.3% and the DAX (^GDAXI) was treading water in Germany.

It came as a report by the Recruitment and Employment Confederation (REC) revealed that there will not be enough workers in some industries for an extended period of time due to the effects of the pandemic.

Neil Carberry, REC’s chief executive, said: “Large numbers of people are finding new work post-pandemic as the economy reshapes.

“But that realignment will take time, and there is good evidence to suggest that the market will remain tight for some years to come, even if the current crisis passes.”

REC’s jobs tracker also showed there were nearly 1.7 million active UK job adverts in the final week of August.

Across the pond, S&P 500 futures (ES=F) were up 0.2%, Dow futures (YM=F) gained 0.1%, and Nasdaq futures (NQ=F) aldo 01% higher as trade began in Europe.

Traders are awaiting the latest US jobs report, which will determine whether the US labour market continued to recover last month.

Economists have predicted that around 750,000 new jobs were created last month, following a 943,000 gain in July.

Read more: Economists look for decelerating job gains amid Delta spread

“With the various unemployment and stimulus benefits coming to an end this month, with some states starting to remove them earlier, hiring trends ought to remain robust over the next few weeks,” Michael Hewson of CMC Markets said.

“Even if they don’t, attention will soon shift to this month’s Fed meeting, in terms of a timeline towards a reduction in the monthly asset purchase program.

“A poor report won’t change the likelihood of a tapering of purchases, but it will affect the pace, timing and scope of one, potentially pushing it into next year. A poor number could also push the US dollar even lower, and on course for another weekly decline.”

Asian stock markets were mixed on Friday after Wall Street hit a fresh record on Thursday.

In Japan, the Nikkei (^N225) climbed 2% while other key markets lagged. The Hang Seng (^HSI) fell 0.9% and the Shanghai Composite (000001.SS) dipped 0.5%.

It came as China’s service sector contracted last month, as the pandemic hit activity and demand.

The Caixin/Markit services Purchasing Managers’ Index (PMI) slumped from 54.9 in July to 46.7 in August, well below expectations of a measure of 54. Anything below 50 represents a contraction.

Wang Zhe, senior economist at Caixin Insight Group, said: “Service costs were still under great pressure amid elevated labour and transportation costs amid the Covid-19 resurgence.”

Activity across Australia and Japan’s service sectors also fell last month amid increased lockdown restrictions that were imposed to combat the pandemic.

Watch: China's economy under pressure, growth slows

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