LGT Navigator

Data shows weakening European economy

Rising consumer prices and falling investor sentiment in Germany as well as increasing unemployment in the UK were among a slew of weak economic data coming out of Europe on Tuesday. Nevertheless, stock markets chose to largely ignore the continent’s deteriorating economic prospects, instead looking ahead to inflation data out of the US and the Fed’s Beige Book, both due on Wednesday, as well as the start of the corporate earnings season in the coming days.

Shane Strowmatt, LGT
Reading time
5 minutes
© Shutterstock

German core inflation, which strips out energy and food prices, was up 5.8% in June after increasing 5.4% in May. The broader struggle in Europe’s largest economy, which entered a recession late last year, was reflected by a German investor morale survey released on Tuesday. The ZEW Indicator of Economic Sentiment fell to -14.7 in July from -8.5 points in June. Other sentiment indicators, such as the Ifo survey and Sentix index for the euro area have likewise recently produce weak results. Elsewhere in Europe, UK unemployment increased to 4% at the end of May from 3.8% a month earlier, the Office for National Statistics said. Inflation in the UK is the highest of the large, developed economies, easing recently but still near 9% and far above the Bank of England’s target of 2%.

On the New York Stock Exchange, stock indices were up, despite the poor Europe economic data. Traders cited measures taken by China to prop up its domestic property market as one the main reason for the positive sentiment. The Dow Jones Industrial gained 0.93% to finish the session at 34,261.42 points and the S&P 500 closed up 0.67% at 4,439.26 points. On the Nasdaq technology exchange, the indices were up around 0.5%. In individual stocks, Activision Blizzard shares shot up 10% after a US judge rejected a request from regulators to end Microsoft’s takeover of the gaming company.

In geopolitical news, Turkey agreed to Sweden joining NATO on Tuesday. The Nordic countries of Sweden and Finland both sought membership in the Western military alliance last year after Russia invaded neighbouring Ukraine. Finland joined in April of this year, but Turkey had originally blocked Sweden’s attempt to join citing concerns that Sweden could be hosting Kurdish militants.

In Asia, stock markets were unable to keep the positive momentum from US markets going in early Wednesday trading. Instead, traders were positioning themselves ahead of Wednesday’s inflation data due out of the US. In Tokyo, the Nikkei 225 was trading down 0.7% despite producer prices increasing at a slower pace than in the past months, rising 4.1% in June. In South Korea, the Kospi gained 0.2%. In Australia, the S&P/ASX 200 was up 0.4%. Hong Kong's Hang Seng Index led the region, up 1.3%, while the Shanghai Composite fell 0.2%.

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

Economic data in focus: US Consumer Price Index (14:30 CET), Fed Beige Book (20:00).

LGT helps you make informed investment decisions

All about global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

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

Contact us