Events in Russia spilled over into the Ukraine war over the weekend. The uprising of the Russian private army Wagner led by Yevgeny Prigozhin threatened to escalate into a coup against Putin. Although the Kremlin was able to avert this, the episode reveals cracks in Putin's state apparatus and illustrates to investors how fragile the geopolitical situation is. Oil prices briefly traded higher, while on the equity markets in Asia the focus was on economic concerns and rising key interest rates in Europe. Today, the focus is on the latest survey results from the Munich-based economic research institute Ifo.
In Tokyo, the Nikkei 225 made up earlier losses and is trading virtually unchanged at Friday's close. South Korea's Kospi, on the other hand, traded in the green with a gain of 0.5%. Hong Kong's Hang Seng Index initially recovered from last week's losses to open around 0.5% higher but ended the day around 0.15% lower. On the Chinese mainland, the Shanghai Composite and the Shenzhen Component both fell by 0.7%. In Australia, the S&P/ASX 200 fell 0.4%, weighed down by energy stocks. Oil prices gave back their early gains on Monday after an attempted riot in Russia stoked fears that energy supplies could be disrupted by possible unrest in one of the world's biggest oil-producing countries.
On the New York Stock Exchange, recent interest rate hikes in Europe and recent hawkish statements by Federal Reserve Chairman Jerome Powell weighed on share prices. The Dow Jones Industrial closed 0.65% lower than the previous day at 33'727.43 points, posting a loss of 1.7% for the week. After Fed Chairman Powell indicated that key interest rates in the US are likely to remain at a higher level for a longer period in view of the still high inflation, technology stocks in particular were again under pressure. The Nasdaq 100 fell by 1.0% on Friday. The market-wide S&P 500 went into the weekend with a minus of 0.77% at 4'348.33 points. While the US dollar held steady against the euro at just under 1.09, the yield on ten-year US government bonds started the new week at 3.72%, slightly lower than its recent level of 3.8%.
In the US, the S&P Global purchasing managers' index for the private sector signalled a clearer-than-expected deterioration in the general economic situation with a decline to 53.0 points from 54.3 in May. The activity barometer is thus at its lowest level in three months.
In the euro area, sentiment among companies regularly surveyed by S&P Global deteriorated. The Purchasing Managers' Index for the private sector (PMI Composite) fell from 52.8 to 50.3 points, a much stronger decline than expected (consensus 52.5). According to S&P Global, the euro economy almost came to a standstill in June after a brief revival in the spring.
Business sentiment in the UK was also dampened in June. The Purchasing Managers' Index for the private sector fell by 1.2 points to 52.8 (consensus 53.6), the lowest level in three months, according to S&P Global. According to S&P Global Chief Economist Chris Williamson, the UK is likely to weaken further in the coming months.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: Switzerland consensus forecasts from the KOF economic research institute (09:00 CET), Germany Ifo business climate index for June (10:00) and from the US the Dallas Fed's industrial barometer for June (16:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.