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Politics in the spotlight

Two TV debates are likely to be watched with great interest this week. Prime Minister Rishi Sunak and opposition leader Keir Starmer will face off on Wednesday ahead of the UK general election on 4 July. This is followed on Friday by the first televised debate between US presidential candidates Joe Biden and Donald Trump. In addition, tensions are rising in the run-up to the forthcoming elections in France. While stock markets have had a subdued start to the week, today's focus will be on the Munich-based Ifo Institute's economic barometer. Purchasing managers' survey figures released at the end of last week showed a surprisingly sharp deterioration in economic sentiment in the Eurozone and the UK. 

Alessandro Fezzi, LGT
Reading time
5 minutes
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In Asia, stock markets started the new week mostly lower. Only in Tokyo did the Nikkei 225 rise by 0.2%, making it the only major Asian benchmark to be in positive territory today. The focus will be on inflation data from Japan and Australia later in the week. Last week, the Bank of Japan announced that it would discuss raising interest rates at its June policy meeting. However, it stated that a change in the key interest rate should only be considered if economic indicators confirm that, for example, inflation has clearly started to pick up and medium to long-term inflation expectations have risen. Markets are now pricing in another rate hike in July. The Australian S&P/ASX 200 was down 0.6%. If inflation in Australia turns out to be higher than expected, this could prompt the Reserve Bank of Australia (RBA) to raise interest rates. The RBA's next interest rate decision is on 6 August. In Hong Kong, the Hang Seng Index fell just over 1% and in mainland China the CSI 300 lost 0.5%. China reported a 2.8% decline in tax revenue in the first five months of 2024 compared to 2023, widening the year-on-year decline from January to April to 2.7%. South Korea's benchmark Kospi fell 0.8% and the small-cap Kosdaq fell 1.1%.

Wall Street takes a breather after recent record run

The New York Stock Exchange's major indices failed to build on the momentum of the previous days on Friday. After hitting record highs on Thursday, the S&P 500 and the Nasdaq 100 were hit by profit-taking in hot stocks such as Nvidia & Co. The S&P 500 closed at 5464.62 (-0.16%) and the Nasdaq 100 closed at 19,700.43 (-0.26%). The Dow Jones Industrial closed slightly higher at 39,150.33, up 1.5% for the week. Renewed doubts about an imminent Fed rate cut were a headwind after the S&P Global Purchasing Managers' Index for June showed an improvement in US private sector sentiment.

In the bond market, prices turned slightly negative following better than expected US economic data, with the yield on ten-year US Treasuries currently at 4.25%. On the currency front, the euro traded just below 1.07 against the US dollar, weighed down by weaker-than-expected Eurozone PMI data.

US businesses more optimistic...

The monthly survey of US private sector purchasing managers signalled a more optimistic mood among the companies surveyed. At the end of the second quarter, the PMI composite reached its highest level in 26 months. The services sector was particularly upbeat. When comparing the S&P Global PMI with the even more closely watched Institute for Supply Management (ISM) PMI, it is important to note that the monthly S&P Global survey focuses more on private, smaller and domestically oriented companies, while the ISM survey focuses more on public, larger and multinational companies.

...while sentiment is deteriorating in the eurozone and the UK 

According to the latest results of S&P Global's monthly surveys, economic sentiment in the eurozone deteriorated in June. The private sector Purchasing Managers' Index (PMI) fell from 52.2 to 50.8 points. Economists had been expecting a slight improvement after the PMI had risen steadily in previous months.

Business sentiment in the UK also deteriorated in June. The S&P Global Purchasing Managers' Index stood at 51.7, down 1.3 points on the previous month. The decline was led by the services sector, while the PMI for the manufacturing sector improved slightly. S&P Global also attributes the deterioration in business sentiment to uncertainty surrounding the upcoming UK election.  

Corporate and economic calendar

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

Economic data in focus: Germany Ifo Business Climate Indicator, US Chicago Fed National Activity Index.

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

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