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US inflation slows ahead of data-heavy week

Inflation in the US came to a halt on a month-on-month basis, bringing the US Federal Reserve (Fed) closer to its 2% annual inflation target. The news wasn’t enough for Wall Street to hold on to gains in Friday trading. In Europe, Marine Le Pen's anti-immigration National Rally party made historic gains in the first round of French national elections on Sunday. The euro rallied. In Asia, equity trading was mixed to start the new week.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
US economy
© Shutterstock

US personal consumption expenditures (PCE) came in flat on the month in May, which brought down the year-on-year figure to a growth of 2.6%. Core PCE, which excludes energy and food prices, was also 2.6% when compared with the same month a year earlier. While the cost of services was on the rise during the month, goods dropped. The data was interpreted as bringing the Fed one step closer to being able to cut rates this year. The University of Michigan Consumer Sentiment Index also added to positive sentiment on Friday after being revised upward to 68.2 for June. That’s higher than the preliminary reading of 65.6, but still down from 69.1 in May. In New York, stocks started Friday’s session strong but lost the momentum later in the session and finished the day in the red. The Dow Jones Industrial lost 0.1%, the S&P 500 fell 0.4% and the Nasdaq-100 dropped 0.6%.

A week of PMI, central bankers, inflation data and elections

The week kicks off with Manufacturing Purchasing Managers’ Indices (PMI) from several countries on Monday, including US ISM Manufacturing PMI. Services PMI data follows from countries around the globe on Wednesday. Inflation data from Germany (Monday), the euro area (Tuesday) and Switzerland (Thursday) will reveal how quickly price increases are moving towards central banks’ targets. Likewise, a series of speeches and panel discussions from European Central Bank President Christine Lagarde (Monday, Tuesday and Wednesday) as well as Federal Reserve Chair Jerome Powell (Tuesday) at the ECB Forum on Central Banking in Portugal could provide investors with insight into the top monetary policy chiefs’ thinking. The US employment report finishes off the week on Friday. On the political front, elections will be held in the UK (Thursday) and France holds its second round of voting (Sunday).

Chinese manufacturing activity continues expansion

The Chinese Manufacturing Purchasing Managers’ Index (PMI) increased slightly to 51.8 in June from 51.7 in April, making it the eighth month that the index has remained above a level of 50, which indicates expansion. The private S&P reading contrasted with the results of the official government PMI released on Sunday, which came in at 49.5 for June. Hong Kong's Hang Seng Index was trading roughly flat on Monday, while the CSI 300 was up 0.6%.

In Tokyo, the Nikkei 225 was trading with almost no change after Japan revised its GDP contraction in the first quarter to 2.9% when compared with the same period of the previous year. It has previously estimated a contraction of 1.8%. On a more positive note, the Tankan survey of large Japanese manufacturers increased to +13 in the second quarter from +11 in the first quarter. In South Korea, the Kospi gained 0.1% and Australia’s S&P/ASX 200 lost 0.3%.

German labour market weakness continues

The number of people out of work in Germany increased by 19,000 in June, according to data released on Friday. That was higher than economists had expected. The unemployment rate increased to 6%. Germany’s DAX finished Friday’s session 0.1% higher while the Euro Stoxx 50 lost 0.2%.

Wrapping up last week’s macroeconomic data, Switzerland’s KOF Economic Barometer increased slightly in June and remains just over its long-term average. The index increased 0.5 points in June to 102.7 points. Prospects for business with foreign entities were primarily responsible for the increase. Switzerland’s SMI lost 0.2% on Friday.

Corporate and macroeconomic calendars

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

Economic data in focus: Manufacturing Purchasing Managers’ Indices from several countries throughout the day, including Spain, Italy, France, Germany, the euro zone, the UK and the US; Swiss retail sales, German Consumer Price Index, US ISM Manufacturing PMI, European Central Bank President Christine Lagarde speaks.

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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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