European Stocks Drop as US Debt Ceiling and China Data are Closely Monitored
European stocks dropped on Monday as investors monitored the US debt ceiling and weak economic data from China. The Stoxx Europe 600 Index fell 0.3%, while the Euro Stoxx 50 Index dropped 0.4%.
US Debt Ceiling in Focus
The US debt ceiling has been a major concern for investors in recent weeks. The US Treasury Department has warned that it will run out of money by the end of the month if Congress does not raise the debt limit. The US government has been operating under a temporary suspension of the debt limit since March 2021.
The US Treasury Secretary, Janet Yellen, has urged Congress to raise the debt ceiling as soon as possible. She warned that failure to do so could lead to a “catastrophic” economic crisis.
China Data Weighs on Markets
Investors were also closely monitoring economic data from China. The Chinese economy grew at its slowest pace in more than two decades in the first quarter of 2023. The Chinese government has been trying to stimulate the economy with a series of measures, including tax cuts and increased spending.
The weak economic data from China weighed on markets in Europe and Asia. The Shanghai Composite Index fell 0.7%, while the Hang Seng Index in Hong Kong dropped 0.5%.
European Sectors React Differently
The European markets reacted differently to the news. The banking sector was the worst performer, with the Stoxx Europe 600 Banks Index falling 1.2%. The technology sector was the best performer, with the Stoxx Europe 600 Technology Index rising 0.7%.
European Currencies
The euro was little changed against the US dollar, trading at 1.20. The British pound was also little changed, trading at 1.41 against the US dollar.
European Bonds
European government bonds were mixed. German 10-year bond yields were little changed at -0.17%. French 10-year bond yields rose to 0.02%.
Outlook
Investors will be closely monitoring the US debt ceiling and economic data from China in the coming weeks. Any further signs of weakness in the Chinese economy could weigh on markets in Europe and Asia.