The European Commission cut its economic projections for the euro area on Monday, largely due to weak performance by the continent’s largest economy. Market participants interpreted the weak data as another sign that central banks could be nearing the end of their rate hiking cycles.
In its revised outlook, the European Commission now expects the euro area economy to grow by 0.8% this year. It had previously projected 1.1% growth. The outlook for 2024 was also reduced by 0.3% to 1.3% growth. The largest drag on growth is the bloc’s largest economy, Germany, which was stuck in a recession at the start of the year only to see stagnation in the second quarter. The ECB announces its next policy decision on Thursday with market expectations split between a tenth hike in a row and a pause in the hiking cycle. Despite the weak economic projections, European stocks were able to pull off gains to start the week with the Euro Stoxx 50 ending the session up 0.4% and Germany’s DAX up 0.4%.
In New York, stock indices closed higher, but gains were mixed on Monday. The Dow Jones Industrial ended the session up 0.3% and the S&P 500 gained 0.7%. The Nasdaq-100 jumped 1.2%, helped by gains in some individual stocks. Tesla shares shot up more than 10% following a report from Morgan Stanley that projected its supercomputer Dojo could help it enter the market for self-driving taxis and other software services. Additionally, news reports on Monday suggested the electric carmaker is investing roughly three times as much in a new facility in Mexico than originally planned. Tesla wasn’t the only US tech company to get positive headlines on Monday. Qualcomm shares jumped 3.9% after the company said it has extended a deal with Apple to supply semiconductors for some products. Apple is expected to introduce its newest iPhone at an event on Tuesday.
In Asia, stock markets were mixed in early Tuesday trading. Hong Kong's Hang Seng Index was down 0.3%, while the Shanghai Composite fell 0.2%. Shares of Country Garden were up nearly 4% after news reports that the crisis-ridden property developer has been given a three-year extension by creditors to repay some bonds. In Tokyo, the Nikkei 225 was trading up 0.7% and in South Korea, the Kospi lost 0.5%. In Australia, the S&P/ASX 200 squeezed out a mild gain of 0.2%.
In energy markets, European natural gas prices rose for a third session in a row on Monday due to strikes at two Chevron liquefied natural gas (LNG) facilities in Australia, which account for around 7% of global supply. Futures gained as much as 10% on Monday. Chevron is now seeking intervention by a labour regulator to end the labour action. Additionally, issues at Norway’s largest gas field, which will face more capacity restrictions than originally planned due to maintenance, are adding to the tight supply in Europe. Investors are closely watching the developments in European markets as autumn approaches after energy prices spiked in Europe last year due to supply concerns surrounding the war in Ukraine.
Corporate news in focus: Nike annual general meeting, Apple event (19:00 CET).
Economic data in focus: UK employment data (08:00 CET), Germany’s ZEW Indicator of Economic Sentiment (11:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.