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Hopes about US debt ceiling agreement support markets

A series of weak economic data initially put markets under pressure on early Monday. An index for New York state manufacturing plummeted while the European Union increased its inflation expectations for this year and next. Later in the day, positive comments from the US president about the talks Republican lawmakers on how to resolve differing opinions on national debt supported equity markets.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
Aktien Chart
© Shutterstock

The Federal Reserve Bank of New York’s Empire State Manufacturing Survey plunged in May, showing a sharp contraction in business activity. The headline general business conditions index fell 43 points to -31.8 points. Values below zero signal contraction. Nearly half of the survey’s respondents said that business conditions had recently worsened. Business orders also plummeted, according to the survey, coming in at -28 points, or 53 points lower than the previous month. A gloomy sign for the months to come.

In New York, stock markets were supported by positive comments from US President Joe Biden, who said he was optimistic that an agreement on the country’s debt level could be reached. The Dow Jones Industrial increased 0.14% to close Monday at 33,348.60 points. The S&P 500 gained 0.30% to finish the day at 4,136.28 points. The tech-heavy Nasdaq-100 jumped 0.55%, ending the session at 13,413.51.

In Europe, the European Commission raised on Tuesday its outlook for inflation in the euro area. It now expects consumer prices to increase by 5.8% in 2023 and 2.8% in 2024. That is 0.2% and 0.3% higher than its previous projections made. The EU’s executive branch also increased its gross domestic product forecasts for the euro area slightly to 1.1% and 1.6% in 2023 and 2024, respectively.

Swiss Producer and Import Price index rose by 0.2% in April when compared to the previous month, or 1% when compared with April of 2022. Producer prices were 1.9% higher than in April last year, while import prices were 0.9% lower. Prices for machinery drove the higher producer prices alongside electrical equipment and measuring and testing equipment. Prices for natural resources decreased, including petroleum products, metals and gas.

In Asia, stock markets were trading mixed following a series of economic data from China that failed to meet expectations. Chinese retail sales increased 18.4% and industrial production gained 5.6%. In mainland China, the Shanghai Composite was trading 0.2% lower, and the Shenzhen Component dropped 0.4%. Hong Kong’s Hang Seng Index gained 0.6%. Japan’s Nikkei gained 0.7% and South Korea’s Kospi gained 0.3%.

Corporate news in focus: Earnings figures from Vodafone, Imperial Brands, Home Depot. Annual general meetings at Deutsche Börse, Capgemini, JP Morgan, Tesla.

Economic data in focus: Germany’s ZEW Indicator of Economic Sentiment (11:00 CET), Eurozone gross domestic product and trade balance (11:00), US retail sales (14:30), ECB President Christine Lagarde speaks at an award ceremony for former German chancellor Angela Merkel (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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