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Mining stocks knocked off highs by China data; Euro keeps pound under pressure

Mining and metals stocks are underperforming after underwhelming import data from China left the sector’s recent highs looking vulnerable.

Resource stocks are at the bottom of tired-looking European markets and in Australia, a major exporter of metals to China, the stock market is down under in more ways than one.

The Euro Stoxx mining index is 0.5 per cent weaker against a 0.1 per cent slip for the wider Euro Stoxx 600. The FTSE 100 is down 0.1 per cent, with metals producers offsetting strength in defensive sectors. Chilean copper producet Antofagasta is the sector’s biggest faller, down 1.2 per cent. Sydney’s S&P/ASX 200 is also down 0.5 per cent.

Iron ore on China’s Dalian Commodity Exchange snapped three days of gains, falling 1.4 per cent to Rmb587.0 after data showed Chinese imports of the steel ingredient fell in July compared to the previous month.

Chinese exports also missed forecasts, growing 7.2 per cent year-on-year in July in dollar terms, against economists’ forecasts of an 11 per cent increase.

But there is a broader trend of better-looking economic data from China, limiting Tuesday’s reaction to the resource sector, which is more sensitive to shorter-run changes in monthly data.

The Shanghai Composite is up 0.1 per cent and the Hang Seng in Hong Kong is 0.5 per cent higher.

Fitch’s update on the global economy, issued this week, describes China’s recovery as “more pronounced than anticipated,” including what the rating agency described over the wider year as “a clear improvement” in export demand.

As Koon Chow, strategist at UBP says:

Investors are enjoying the current spell of low inflation and strong growth, and one set of weak-looking data from China will not upset that trend.

In the US, Europe, Japan and in the benchmark emerging market countries there is a inflationless upswing in progress. I think the combination of additional retail and institutional risk-taking is pushing equities, corporate bonds and commodities to highs while naysayers are keeping their counsel until perhaps US inflation data.

In the meantime, the dollar is continuing to drift lower, with the index tracking the greenback against six of its rivals 0.1 per cent weaker at 93.317, within sight of the May 2016 low of 91.919. If it falls under that level, it will be back down to lows not reached since Jan 2015.

The euro is keeping the pressure on the pound with sterling at its weakest level against the shared currency since October 2016. The pound is at £0.9060, matching the previous session’s nadir.

The yen is 0.1 per cent stronger at ¥110.64 per dollar

The renminbi firmed to a 10-month high with the onshore renminbi pushing to Rmb6.7057 per dollar after the Chinese central bank fixed the currency slightly firmer to the greenback. This came after data released Monday showed the country had fixed its capital outflows problem, with forex reserves rising in China for a sixth straight month in July.

Oil prices edged lower ahead of the conclusion of a meeting of Opec and non-Opec producers in Abu Dhabi to discuss compliance with agreed output cuts. Brent crude was 0.4 per cent lower at $52.14 a barrel and US marker West Texas Intermediate was down by the same amount at $49.21 a barrel.