Concerns about a further rise in interest rates in the US remain the dominant theme on the capital markets in the new week. The focus will be on the latest US consumer price data due tomorrow, whereby attention will be directed above all to the development of core inflation, which has been stubborn so far. Meanwhile, stock markets on Wall Street stabilised at the beginning of the week and the equity indices in Asia also started positively today.
On the New York Stock Exchange, stock indices were able to regain their footing after recent losses at the beginning of the second half of the year. The Dow Jones Industrial gained 0.62% to 33'944.40 points at the start of the week and the S&P 500 closed 0.24% higher at 4'409.53 points. On the Nasdaq technology exchange, however, the indices remained virtually unchanged on Monday. The dominant topic remains monetary policy and, in this context, the further development of inflation. The latest data on US consumer prices on Wednesday are eagerly awaited. Meanwhile, representatives of the Federal Reserve (Fed) signalled that key interest rates could rise further this year to get inflation under control. Another crucial question for investors will be the extent to which rising interest rates will affect corporate profits. This will be revealed by the third quarter financial statements when the corporate reporting season starts on Friday with the quarterly figures of the big US banks JPMorgan, Citigroup and Wells Fargo. In the bond market, the yield on ten-year US government bonds fell to 4.0%.
In Asia, stock markets followed the positive weekly start on Wall Street on Tuesday. In Tokyo, the Nikkei 225 traded around 0.5% higher and in South Korea, the Kospi and Kosdaq led the gains with 1.2% and 1.5%, respectively. In Australia, the S&P/ASX 200 rose by just over 1%. Hong Kong's Hang Seng Index extended Monday's gains, rising 0.75%, while mainland Chinese markets also all posted gains. The Shanghai Composite rose 0.2% and the Shenzhen Component closed slightly higher. News that China's central bank, in cooperation with the financial regulator, will step up support for the ailing domestic property market was positively received. Specifically, the deadline for repaying certain real estate loans is to be extended by one year. The stalled economic recovery in the world's second largest economy is blamed, among other things, on problems in the real estate market, which has grown far too much over the years.
In the eurozone, the economic outlook deteriorated again in July. This is shown by the latest survey results of the German financial market analysis company Sentix. The corresponding economic indicator fell for the third month in a row - from -17.0 points in June to currently -22.5 points. According to Sentix, the euro economy remains in recession mode, with the economic situation in Germany being particularly dramatic.
The head of the British central bank, Andrew Bailey, is optimistic and expects a significant decline in inflation in the UK. At 8.7%, the inflation rate is currently "unacceptably high", said Baily, but the strong interest rate hikes should now have their full effect. In June, the Bank of England raised its key interest rate by another half a percentage point to 5.0%. The financial markets are currently still expecting interest rates in the UK to rise further by up to 150 basis points.
Corporate news in focus: Telekom Austria Q2 figures and capital market day Daimler Truck.
Economic data in focus: UK unemployment figures for June (08:00 CET), German consumer prices for June (08:00) Italy industrial production for May (10:00) Germany ZEW economic expectations for July (11:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.