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Asian markets dip as factory activity contracts

Asian stocks started the week lower, driven by disappointing factory activity data from Japan and South Korea, which highlighted the ongoing trade challenges in the region. The negative sentiment surrounding US-China trade negotiations further weighed on markets, pressuring the US dollar to start the week. Meanwhile, investors are turning their attention to key central bank meetings and employment data expected later this week, which could provide further direction for global markets.

  • Date
  • Auteur Shane Strowmatt, LGT
  • Temps de lecture 5 minutes

Negative market data
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Factory activity in Asia contracted in May, with Japan's Purchasing Managers’ Index (PMI) at 49.4 and South Korea's at 47.7, both below the 50.0 threshold indicating contraction. The decline is attributed to weak demand in China and the impact of US tariffs. Analysts suggest that uncertainty in US trade policies is likely to deter companies from investing or increasing production in the near term. The data underscores the ongoing challenges faced by trade-reliant economies in the region.

Asian stocks start week lower

Stocks in the Asia-Pacific region were trading lower on Monday, reflecting the negative sentiment surround the US-China trade negotiations and week PMI data. Japan’s Nikkei 225 was down 1.4%, while Korea’s Kospi fell 0.3%. Australia’s S&P/ASX 200 declined 0.3%, and Hong Kong’s Hang Seng Index dropped 1.9%. Mainland China’s CSI 300 was trading 0.5% lower.

Central banks and employment data dominate

This week, central banks and employment data take centre stage. The European Central Bank announces its interest rate decision on Thursday, after the Bank of Canada also makes its interest rate decision a day earlier. In the US, the ISM Manufacturing PMI is released on Monday, and the Non-Farm Payrolls report, including average hourly earnings and the unemployment rate, is due on Friday. Additionally, the euro area releases its harmonised consumer price index on Tuesday and GDP data on Friday.

US markets end week with gains

US stock markets closed with minor changes on Friday, as trade tensions with China and legal disputes over import tariffs dominated investor attention. The Dow Jones Industrial rose by 0.1% to 42,270.07 points, marking a 1.6% gain for the shortened trading week and a 3.9% increase for May. The S&P 500 and Nasdaq-100 saw marginal declines on Friday. In the meantime, the US dollar came under pressure on Monday, as US President Donald Trump's announcement of increased steel and aluminium tariffs to 50% from Wednesday and rising tensions with China dampened market sentiment. Beijing's Commerce Ministry dismissed Trump’s accusations from last week of agreement violations as "groundless" and vowed countermeasures. The dollar index, which measures the currency against six major peers, eased slightly on Monday.

US inflation rises in April

In macroeconomic data, the US Personal Consumption Expenditures (PCE) Price Index increased by 2.1% year-on-year in April, below the market’s expectation of 2.2%. Month-on-month, the index rose by 0.1%, consistent with March's figure. Core PCE, excluding food and energy, also climbed 2.5% annually and 0.1% monthly, aligning with consensus forecasts. Meanwhile, the University of Michigan Index of Consumer Sentiment in the US remained unchanged at 52.2 in May, ending four months of steep declines. Despite a slight mid-month improvement due to a temporary pause on some tariffs on Chinese goods, overall sentiment is significantly lower than the 69.1 recorded a year ago.

Swiss economic outlook remains cautious

The KOF Economic Barometer rose by 1.4 points to 98.5 in May, following a decline last month, yet remains below the long-term average. Despite positive developments in the manufacturing sector, indicators for foreign and consumer demand are under downward pressure. Improved prospects are noted in export activity, production, and competitive position, while the chemical, pharmaceutical, and food industries show favourable outlooks. However, the textile and metal industries face challenges. The SMI closed Friday with a gain of 0.3%.

German inflation eases to 2.1% in May

Germany's harmonized consumer inflation rate fell to 2.1% in May, nearing the European Central Bank's 2% target but slightly exceeding analysts' expectations. This figure compares to 2.2% in April. Core inflation, excluding food and energy, rose to 2.9% from 2.8% in April, while energy prices declined by 4.6%. Economists suggest that German inflation may continue to decline below 2% in the coming months. Germany’s DAX gained 0.3% on Friday, while the Euro Stoxx 50 was down 0.1%.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss retail sales (08:30), Swiss gross domestic product (09:00), US ISM Purchasing Managers’ Index (16:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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