Chinese stocks sag on growth concerns

LONDON Chinese shares underperformed Tuesday after a downbeat manufacturing survey renewed concerns over the world's second-largest economy. European markets were more resilient amid hopes of an interest rate cut from the European Central Bank.

A preliminary survey by HSBC Corp. found that China's manufacturing growth slowed in April, in a further sign that the economy is slowing.

HSBC's monthly purchasing managers' index a gauge of business activity fell to a worse-than-expected 50.5 from March's 51.6 on a 100-point scale. That means it's growing but only just anything below 50 would have signaled a contraction in activity.

"Just as in 2012, Chinese growth is failing to live up to the market's high expectations," said Rebecca O'Keeffe, head of investment at Interactive Investor.

The survey hit Chinese shares particularly hard, with the country's Shanghai Composite Index tumbling 2.6 percent to 2,184.54 and the Shenzhen Composite Index falling 2.7 percent to 923.42. Hong Kong's Hang Seng shed 1.1 percent to 21,806.61.

In Europe, the mood proved more buoyant even though an equivalent survey into manufacturing conditions among the 17 European Union countries that use the euro disappointed, too. The PMI survey from Markit fell another 0.3 points in April to 46.5.

Despite confirmation of the recessionary conditions in much of the eurozone, investors piled back into stocks, possibly because the survey makes it more likely that the ECB will cut interest rates again, possibly next month, to boost growth.

"This is now going to prompt talk again of an ECB rate cut, given that Bundesbank head, Jens Weidmann, conceded recently that a rate cut would be considered if we see further worsening in the economic data," said Craig Erlam, market analyst at Alpari.

Germany's DAX rose 0.6 percent to 7,520 while the CAC-40 in France was up 1.6 percent at 3,709. The FTSE 100 index of leading British shares was 0.7 percent higher at 6,326.

Wall Street was poised for a steady opening, with Dow futures and the broader S&P 500 futures down 0.1 percent. How they will open could hinge on a raft of corporate earnings from the likes of DuPont, US Airways and Delta Airlines. About a third of the companies in the S&P 500 index will report earnings this week.

The main point of interest will be when Apple reports after the markets close. The company has seen its share price take a battering over the past few months amid mounting concerns over its product line and tough competition.

"There will also be a lot of interest in the outlook for Apple, with the current share price reflecting the pessimism surrounding the company, compared to last year," said Alpari's Erlam.

Elsewhere in Asia, Japan's benchmark Nikkei index slipped as the yen gained ground against the dollar. The Nikkei 225 in Tokyo fell 0.3 percent to close at 13,529.65.

By late morning London time, the dollar was down 0.6 percent at 98.70 yen. However the dollar was rising against the euro, which was trading 0.6 percent lower at $1.2988.

Oil prices were also depressed following the disappointing economic data, with the benchmark New York rate down 82 cents at $88.37 a barrel.