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US retail sales stall

US retail sales grew at a slower pace than expected last month, in a sign that inflation and high interest rates were pressuring consumers in the world’s largest economy. Treasuries rallied after the release of the retail sales data. Later on Tuesday, equity markets rose after US industrial production data showed a pick-up in factory activity in May.

Shane Strowmatt, LGT
Tempo di lettura
5 minuto
Sale sign in store
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US retail sales increased by 0.1% in the month of May when compared to the previous month, or 2.3% when compared with the same month a year earlier. Economists were calling for a slightly higher monthly increase. Retail sales for the previous months were also revised downward with the figure now dropping 0.2% in April. Last week, both US consumer and producer prices came in below expectations. Weaker-than-expected consumer and producer prices in combination with weak retail sales and cracks in the labour market bolster the Federal Reserve (Fed)’s plans to begin cutting interest rates soon.

Treasury yields fell across the curve on Tuesday with two-year yields trading around 4.7% and ten-year yields just over 4.2%. Later in the day, a month-on-month increase of 0.9% in US factory production in May quelled fears that the weak retail sales could have a negative impact on corporate earnings. In New York, stock indices continued to climb higher despite a series of recent all-time highs. The Dow Jones Industrial gained 0.2% and the S&P 500 closed 0.3% higher. The Nasdaq-100 ended the session just marginally in positive territory, supported by chipmaking stocks.

Nvidia becomes world’s most valuable company

In individual stocks, Nvidia shares shot up another 3.6% on Tuesday, making it the most valuable publicly traded company in the world. With a market capitalisation of USD 3.34 trillion, the company has now surpassed Microsoft’s market capitalisation. Nvidia shares are up 174% since the beginning of the year as demand for its chips used in artificial-intelligence related data centres has exploded.

Mixed Japanese macroeconomic data

In Tokyo, the Nikkei 225 gained 0.2% after releasing trade data for May that showed exports increased 13.5% on the year, beating expectations. Imports increased 9.5% in the same period. Business confidence among Japan’s biggest manufacturing companies fell to +6 from +9 in May, while non-manufacturing companies increased to +31 from +26, according to the Tankan Index. In South Korea, the Kospi shot up 1%, driven by Samsung shares, which were trading 1.8% higher. In Australia, the S&P/ASX 200 was trading 0.2% lower. Hong Kong's Hang Seng Index was up 2.3% after China’s securities regulator said it is looking to strengthen regulations to prevent illegal capital market activities. Stocks in mainland China were trading slightly lower with the CSI 300 losing 0.3%.

German economic expectations stall

The expectations component of Germany’s ZEW Indicator slowed in June, calling into question the strength of Germany’s economic recovery. The expectations gauge increased to 47.5 points from 47.1 in May. The current conditions component fell 1.5 points to -73.8 in June. The ZEW survey results come after last month the Ifo Institute’s survey showed increasing German business expectations for a fourth month in a row and the German economy was confirmed to have grown 0.2% in the first quarter, following contraction in the previous quarter. Germany’s DAX gained 0.3% on Tuesday.

Also in Europe, annual inflation in the euro area came in at 2.6% in May, an increase from April’s 2.4%. Inflation in the services sector as well as food, alcohol and tobacco contributed to the higher prices the most. Euro Stoxx 50 increased 0.7%.

Corporate and macroeconomic calendars

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: UK Consumer Price Index, UK Producer Price Index.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.