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China manufacturing growth fails to ignite markets

China manufacturing growth fails to ignite markets

Stock markets made a lacklustre start to December, with Britain’s FTSE 100 drifting lower as investors looked ahead nervously to some key economic updates over the coming week.

The UK’s blue chip index fell 0.3% 6,629 despite upbeat economic data from China. The country’s official manufacturing PMI for November beating expectations at 51.4, matching October’s level. A reading above 50 signals expansion.

‘Overall the report is not a bad one, indicating a still resilient pace of production and demand in Q4,’ commented Wei Yao, an economist at Societe Generale. ‘However , a number of details suggest that growth acceleration is near its end.’

At the same time, the unofficial HSBC index for China’s manufacturing came in at 50.8.

Among London shares, Sainsbury (SBRY.L) and Tesco (TSCO.L) both declined around 2% ahead of the latter's interim management statement on Wednesday.

Debenhams (DEB.L) fell 4.3% to 92p after analysts at Barclays downgraded the shares to 'underweight'. Their assessment was bleak: 'Debenhams' online sales are margin dilutive, their online offering lags competitors, and consensus underestimates the investment necessary both in cost and time before the company catches up with competition in our view.'

Investors have a packed week of major economic reports ahead, culminating on Friday with US jobs data; the non-farm payrolls number and unemployment rate are watched closely by markets attempting to predict when the US Federal Reserve will start to reduce the scale of its monthly bond buying programme.

Economists polled by Reuters said to expect an increase of 185,000 jobs last month, down from 204,000 in October.

The European Central Bank’s monthly policy meeting also takes place, while in the UK chancellor George Osborne is likely to use his Autumn Statement to announce upgrades to the UK economic growth forecast.

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