Consumer confidence in the US came in much stronger this month than projected, painting the picture of an economy that may be able to avoid the strong downturn many market participants have been expecting for the second half of the year. Solid data released Tuesday from the US housing market confirmed that view. Markets on both sides of the Atlantic reacted positively during Tuesday’s session, but Asian markets were mixed in early Wednesday trading.
The Conference Board Consumer Confidence Index in the US jumped to 109.7 in June from 102.5 in May, the highest level since early last year. The Present Situation Index and Expectations Index also both saw strong increases. The Expectations Index was 79.3, just below the 80-level, which signals an expected recession within the next year. In addition to the strong consumer confidence data, US new home sales increased at a rapid pace in May. Sales of new single-family homes increased by 12.2%, data released Tuesday showed. The strong Consumer Confidence Survey results and robust US new home purchases fly in the face of economists’ expectations of a weak US economy for the rest of the year. The strong economic data also calls into question the US Federal Reserve’s (Fed) decision to pause its rate hiking cycle earlier this month.
In New York, investors turned markets around after six days of straight losses on Tuesday. The Dow Jones Industrial gained 0.63% to close at 33,926.74 points. The S&P 500 jumped 1.15%, finishing at 4,378.41 points. The Nasdaq-100 topped gains among the major indices, increasing 1.75% and ending the day at 14,946.91 points.
Stock markets in the Asia-Pacific region were mixed Wednesday as macroeconomic data out of China and Australia gave investors food for thought. Chinese industrial profits were down 18.8% in the first five months of the year, calling into question the strength of the reopening of the world’s second-largest economy. The Shanghai Composite lost 0.5% while Hong Kong's Hang Seng Index fell by 0.2% on Wednesday. Australia’s S&P/ASX 200 gained 1.1% after May’s inflation reading came in at a its lowest in more than a year at 5.6%. Japan’s Nikkei 225 climbed 1.6% and South Korea’s Kopsi fell 0.7%.
In Europe, European Central Bank (ECB) President Christine Lagarde said at an ECB forum Sintra, Portugal, that the euro economy is facing lingering inflation that could last for quite some time. While the initial round of inflation on the continent was driven by energy costs, a spillover into other markets is currently ongoing. Consequently, it is too soon to declare that peak rates have been reached, Lagarde said. Earlier this month, the ECB lifted its deposit rate to 3.5%, the highest level in more than two decades. Inflation in the euro area is still around 6%, much higher than the central bank’s 2% target. The Euro Stoxx 50 ended Tuesday up 0.58%.
Corporate news in focus: Porsche AG annual general meeting, Micron Technology Q3 figures.
Economic data in focus: GfK consumer confidence Germany (08:00 CET); Fed Chair Jerome Powell, ECB President Christine Lagarde, BoJ Governor Kazuo Ueda and BoE Governor Andrew Bailey speak at an ECB forum in Sintra (15:30); weekly EIA petroleum status report (16:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.