Asian equities started the week on a positive note, shrugging off weak macroeconomic data from China, where the official Purchasing Managers’ Index (PMI) remained in contraction territory for the third consecutive month. Gains in Japan, Korea, and Australia helped lift regional sentiment, while Wall Street’s record highs on Friday provided further support. Market participants will now turn their attention to key inflation and labour market data due later this week, as well as speeches from central bank leaders at a conference in Portugal.
China’s manufacturing sector showed contraction for the third consecutive month in June, with the official PMI rising slightly to 49.7 from 49.5 in May but remaining below the 50-point threshold that separates expansion from contraction. While production and new orders improved, factory inventory and employment levels continued to decline. The non-manufacturing PMI, covering services and construction, edged higher to 50.5, driven by infrastructure activity. Despite the weak PMI data, Asia-Pacific equities were trading mostly higher on Monday, following Wall Street's positive close last week. Mainland China’s CSI 300 edged up 0.2% while Hong Kong’s Hang Seng Index lagged, trading 0.4% lower. Japan’s Nikkei 225 was up 0.8%, hitting an 11-month high, after industrial production for May came in 0.5% higher than in the previous month. Korea’s Kospi climbed 0.6%, while Australia’s S&P/ASX 200 added 0.5%.
US stock markets reached new highs on Friday, driven by progress in trade negotiations and speculation over potential interest rate cuts. The S&P 500 and Nasdaq indices posted record closes, while the Dow Jones Industrial rose 1% to 43,819.27 points, marking a weekly gain of 3.8%. Positive developments included an agreement between the US and China to ease trade restrictions and potential progress on a US-EU trade deal. Nike shares surged 15.2% following better-than-expected earnings, while Nvidia and Amazon also hit significant highs.
Adding to the positive sentiment early in the week was Canada’s move to withdraw its digital services tax targeting US technology companies just hours before its implementation, aiming to revive stalled trade negotiations with the United States. The tax, which would have imposed a 3% levy on digital revenues exceeding CAD 20 million annually, faced strong opposition from US President Donald Trump, who threatened new tariffs on Canadian goods. Canadian Prime Minister Mark Carney now seeks to finalise a trade deal with the US by July 21.
In US macroeconomics, consumer spending fell by 0.1% in May, marking its second decline this year, as the effects of pre-tariff buying faded. Core Personal Consumption Expenditures (PCE) inflation rose 0.2% for the month, reaching 2.7% on a year-over-year basis, while personal income dropped 0.4%, partly due to reduced Social Security-related payments.
This week, markets will closely monitor key inflation and labour market data from major economies. In the euro area, inflation figures including the Harmonised Consumer Price Index (CPI) are released on Tuesday, while Germany reports its CPI on Monday and Switzerland on Thursday. Labour market updates from the United States, including non-farm payrolls and average hourly earnings, are due on Thursday, while the ISM Manufacturing Purchasing Managers’ Index is released on Tuesday. In Asia, China’s Caixin Manufacturing and Services PMIs (Tuesday and Thursday) and Japan’s Tankan Manufacturing Index (Tuesday) provide further insights into regional economic activity. Speeches by central bank leaders from the European Central Bank Forum on Central Banking in Portugal will also be scrutinized by market participants.
Economic sentiment in Europe weakened in June, with the Economic Sentiment Indicator (ESI) falling by 1.0 points to 94.0 in the EU and by 0.8 points to 94.0 in the euro area, both below their long-term averages. The decline was driven by reduced confidence in the industry sector, while retail trade also contributed modestly. European stocks nevertheless ended the week on a strong note, with broad-based gains across major indices. The Euro Stoxx 50 climbed 1.6% to 5,325.64 points, while Germany’s DAX added 1.6% and France’s CAC 40 surged 1.8%. The Swiss Market Index rose 0.8%.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: German retail sales (08:00), UK gross domestic product (08:00), Swiss KOF Economic Barometer (09:00), German Consumer Price Index (14:00), European Central Bank President Christine Lagarde speaks (19:30).
Global economic and market trends at a glance
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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.