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Stock markets stall after strong first half of year

The strong gains seen at the end of the first half of the year appeared to have lost their momentum after two quiet sessions on Monday and Tuesday. Investors’ focus shifted to the minutes of the US Federal Reserve’s (Fed) policy-making body, the Federal Open Market Committee, due Wednesday evening. US markets remained closed on Tuesday after closing early on Monday for the Independence Day holiday.

Shane Strowmatt, LGT
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In Asia, markets were under pressure due to soft Services Purchasing Managers’ Indices (PMI) out of Japan and China. China’s services PMI came in at 53.9 points in June, down from 57.1 in May, the slowest pace of growth in five months and highlighting the fragile reopening of the world’s second-largest economy. Hong Kong’s Hang Seng Index was trading 1.4% lower Wednesday and the Shanghai Composite lost 0.7%. Japan’s Nikkei 225 was down 0.5% after June Services PMI was reported at 54.0, down from 55.9 a month earlier. Australia’s S&P/ASX 200 lost 0.4% and South Korea’s Kospi dropped 0.5%.

In Europe, markets finished slightly lower on Tuesday, with the Europe Stoxx 50 finishing the session down 0.16%. France’s CAC 40 lost 0.23%. Germany’s DAX ended the day down 0.26% after trade data released Tuesday showed the country’s trade surplus fell in May. The adjusted trade surplus of Europe’s largest economy dropped to 14.4 billion euros, down from 16.5 billion euros in the previous month. Switzerland’s SMI was essentially flat, losing 0.02%.

Underscoring the effect of central banks’ quick hiking cycles over the last roughly 18 months, the Organisation for Economic Co-operation and Development (OECD) said Tuesday inflation in the world’s biggest advanced economies is at the lowest level since September 2021. Inflation in G7 countries was 4.6% in May, down from 5.4% in April. Despite the falling pace of price increases, the world’s largest central banks - the Fed and European Central Bank - have signalled they will likely continue to hike rates at upcoming policy meetings.

Elsewhere in Europe, UK mortgage costs climbed to new highs for the year, topping 6% for an average five-year, fixed-rate home loan on Tuesday. The increasing rates have become an area of concern for some investors and analysts who see borrowing costs pressuring households’ budgets further amid high inflation.

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

Economic data in focus: Services Purchasing Managers’ Index eurozone (10:00 CET), Producer Price Index eurozone (11:00), FOMC minutes (20:00).

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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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