The Purchasing Managers Index score for China was revealed to have fallen to 49.7 in August from 50 in July.
A reading of 50 indicates a stable level, with above meaning an expansion and below a contraction.
The FTSE 100 was 2.2% off by late morning, the DAX was 2.3% down, France’s CAC 40 fell 2%, while Spain’s IBEX 35 and the FTSE MIB were down 2% and 1.4% respectively.
The fall in the PMI represents a three-year low, but it had been widely expected so appears not to have prompted any market rout.
“Another day, another sign of weakness from the Chinese economy as the official manufacturing PMI reading fell back into contraction for the first time in six months,” said IG market analyst Joshua Mahony. “The importance of today’s announcement is that the slowdown is hitting the larger state-backed firms who typically take longer to feel the pain than the SME’s covered by the Caixin measure, which has been in contraction since February,” he added.
“Chinese markets have started the week just as the past three weeks have begun, with widespread selling and the expectation that the worst may not yet be over,” Mahoney continued. “There are precious few signs that China is beginning to recover, and while PBoC action can provide a temporary reprieve, we are yet to see any evidence that it is doing any good to the economy.”
