After the recent highs on Wall Street, investors have taken profits at the end of the trading week and US stock markets closed with losses on Friday. The S&P 500 lost -0.5% to 4395.26 points and the Dow Jones Industrial declined -0.4% to 34’935.47 points. The Nasdaq 100 closed -0.6% lower at 14’959.90 points. Index futures again signal a friendly start for the first trading day in August.
After the roller coaster ride of last week, Asian stock markets are up on Monday. In Tokyo, the Nikkei gains +1.9% and the Hang Seng in Hong Kong advances +0.9%. The Shanghai Composite is +1.5% firmer. This is even though industrial activity in China in July has weakened more than expected. Thus, the Caixin/Markit Purchasing Managers' Index (PMI) for the manufacturing sector fell from 51.3 points in June to 50.3 points. While this means the PMI continues to signal an expansion in industrial activity, it is trading at its lowest level since April 2020. Analysts had only expected a decline to 51.1 points. China's economy has largely recovered from the corona pandemic. However, in recent months, shortages of raw materials have caused disruptions in supply chains and pushed up prices.
Americans spent more money again in June. Thus, private consumer spending increased by +1% month-on-month, as reported by the Commerce Department in Washington on Friday. Analysts had expected a plus of +0.7%. In May, a slight decline of -0.1% had resulted. Household incomes, however, hardly increased with +0.1%. Consumer behavior, which has a major impact on US economic performance, could quickly change again. Thus, the spread of the delta variant of the coronavirus could cause renewed restraint in the coming months. In addition, inflation remains high, as current data show: Consumer prices rose +4% year-on-year in June. Excluding energy and food prices, price inflation was +3.5%. The annual PCE inflation rate is the Fed's preferred measure for managing price stability. It aims for a target value of 2% on average over the economic cycle - so although inflation is currently above 2%, the longer observation period gives room for maneuver and means that the Fed does not have to adjust the monetary policy course. In recent months, the Federal Reserve has regularly emphasized that it considers the price increase to be temporary.
The European economy gained momentum in the spring and found its way out of recession. The gross domestic product grew by +2% from April to June compared to the previous quarter, the statistics office Eurostat announced on Friday after a first estimate. Analysts had expected growth of only +1.5%. In the final quarter of 2020 and in the first quarter of 2021, European economic output had contracted, economists speak in such a case of a technical recession. The four largest economies in the eurozone all grew in the second quarter. The Spanish economy grew by + 2.8% quarter-on-quarter, followed by Italy with + 2.7%. GDP growth was significantly weaker in Germany (+1.5%) and France (+0.9%).
The outlook for the Swiss economy remains favorable. Although the Kof economic barometer of the ETH Zurich fell for the second time in a row in July, it is still clearly above long-term average and thus signals a positive economic trend in the coming months. The leading indicator currently stands at 129.8 points, which is -3.5 lower than in the previous month. In May, it had reached a record level of 143.6 points. "The economy remains on a strong expansion course, although the high pace of recent months is unlikely to be sustained," commented the Kof. While the outlook for the hospitality and services sectors improved in July, the outlook for manufacturing clouded.
|03:45||China||HSBC purchasing manager index (July)||51.3|
|08:30||CH||Retail sales (y/y, June)||+2.8%|
|08:30||CH||Consumer price index (m/m, July)||+0.1%|
|10:00||EZ||Purchasing manager index (July)||63.4|
|16:00||US||ISM index (July)||66.1|
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Source: LGT Bank (Switzerland) Ltd.
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