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European markets steady ahead of earnings season

 

Wednesday, July 05, 2023

Today’s headlines

What’s happening: European stock markets closed mixed on Tuesday, ahead of major economic data releases and the start of the next earnings season.

What happened: Trading remained subdued on Tuesday with few economic reports from the Eurozone and the US markets being closed for Independence Day.

The pan-European index gained slightly even though Germany released some concerning economic data.

Why it matters: Global investors have been monitoring hawkish signals from central bank officials from around the world. Major central banks have reiterated their commitment to bringing inflation back to their target levels, despite a slowdown in economic growth in the US and the Eurozone.

Although the Reserve Bank of Australia maintained its interest rates at 4.1% at its latest meeting, policymakers warned of further tightening ahead to combat inflation. Australia’s inflation eased to 5.6% in May, from 6.5% in the previous month.

Data released on Tuesday showed Germany’s trade surplus shrinking to €14.4 billion in May, from €16.5 billion in the prior month. The figure was also much lower than market estimates of €17.5 billion. This marked the smallest surplus since December 2022, with imports increasing for the first time in three months. Exports fell 0.1% to €130.5 billion, missing expectations of 0.3% growth, while imports grew by 1.7% to a three-month high of €116.1 billion.

The STOXX Europe 600 Index gained 0.07% to close at 461.30 on Tuesday, with healthcare and real estate stocks leading the gains. Banking stocks were among the worst performers of the session.

London’s FTSE 100 fell 0.10% to close at 7,519.72 on Tuesday, while Germany’s DAX 40 and France’s CAC 40 lost 0.26% and 0.23%, respectively.

What to watch: Investors will watch the release of minutes from the US Federal Reserve’s latest meeting on Wednesday. Speculations are for the Fed to raise rates by 25 basis points at the July meeting.

Markets also await the release of data on Eurozone PPI, services and composite PMIs today. The HCOB services PMI is expected to decline by 1.7 points to 52.4 in June, while composite PMI is projected to decline to 50.3 in June, from 52.8 in the earlier month. Analysts expect producer prices to ease 1.6% in May, following a 3.2% decline in April.

The markets today

Bitcoin will be in focus today after trading close to the $31,000 level on Tuesday

Context: Bitcoin traded slightly lower on Tuesday, with trading volumes remaining low as the US markets were closed for the 4th of July holiday.

Details: The largest cryptocurrency by market valuation gained around 2% on Monday, surpassing the key $31,000 level after Blackrock resubmitted its Bitcoin ETF application in the US.

Bitcoin peaked above the $31,100 mark, after sliding down below the $29,900 support level last week. However, the crypto’s volatility remained low, below 2%. Bitcoin’s market dominance rose to 50% last week but settled back close to 48%.

Bitcoin has gained around 15% over the past two weeks and added 13% over the past month.

Cryptocurrency markets got a boost from news of the Swiss National Bank looking to launch a CBDC (central bank digital currency) on the SIX digital exchange, the country’s principal stock exchange. Swiss National Bank Chairman Thomas Jordan said at the Point Zero Forum in Zurich, “This is not just an experiment, it will be real money equivalent to bank reserves…The objective is to test real transactions with market participants.”

What are expectations: Markets will monitor the global economic environment, which could provide direction to the cryptocurrency market ahead. Traders will also continue watching comments from central bank officials regarding their monetary policies.

Other Markets: Asian trading indices were trading lower this morning, with the Asia Dow, Nikkei 225, Hang Seng, Shanghai, and Sensex down by 0.57%, 0.49%, 1.38%, 0.51% and 0.08%, respectively.

The news shaping the markets

Ukrainian leaders lashed out at Unilever, calling it a “sponsors of war,” following reports of the company paying $331 million in taxes to Russia last year. The news sent the safe-haven US dollar index higher this morning.


China’s Caixin general services PMI fell to 53.9 in June, from 57.1 in the prior month, exerting pressure on the CNY/USD forex pair.


Australia’s Ai Group Industry Index fell to -11.9 in June, from -10.9 in the previous month, which sent the AUD/USD pair lower in forex trading this morning.


Japan’s au Jibun Bank Flash services business activity index was revised down to 54.0 in June, from the preliminary reading of 54.2, exerting pressure on the JPY/USD forex pair.


Ireland’s AIB services PMI fell to 56.8 in June, from 57 in the prior month, which sent the EUR/USD pair lower in forex trading this morning.

What else to watch today

Russia’s services PMI and composite PMI, France’s industrial production, services PMI and composite PMI, Spain’s industrial Production, services PMI, composite PMI and consumer confidence indicator, Turkey’s inflation rate and producer inflation, South Africa’s S&P Global PMI, Italy’s services PMI and composite PMI, Germany’s services PMI, composite PMI and passenger car registrations, UK’s new passenger car registrations, services PMI and composite PMI, Mexico’s consumer confidence and gross fixed investment, US Redbook index, factory orders, IBD/TIPP economic optimism index, Logistics Manager’s index and API crude oil stocks, as well as Brazil’s services PMI and composite PMI.


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