Yesterday morning, Eurozone inflation came in showing a slower growth of 2.5% in June, in contrast to 2.6% in May. Recently, ECB president, Christine Lagarde, stated that inflation will not likely go below their 2% target until sometime next year. Although the headline figure – at least – seems to be on the right trajectory, the ECB will likely take note of both the core rate – which excludes volatile elements like food and energy – and services inflation, which held steady at 2.9% and 4.1% respectively – showing no signs of cooling from May. The market has currently priced in two more rate cuts from the Central Bank over their next 4 meetings, however they themselves maintain a data dependent stance, with Lagarde saying they don’t have a determined path.
All eyes are on the UK’s general election due to take place on Thursday. According to many opinion polls, Labour may manage to swing their first victory following their exit from power in 2010. While Labour’s manifesto is filled with pledges to cap corporation tax at 25%, as well as implementing a new industrial strategy to aid business investment, it is unlikely that either a Conservative or Labour government will move markets in a material way in the long term. However, both frontrunners are not as divergent in policy as they have perhaps been in the past, allowing the market to digest and become familiar with their potential seat in office.
Over in China, shares in property companies surged on Tuesday following the news that annual sales declined for major Chinese property developers which continued to decrease in June. According to data from property researcher CRIC, the sales value of China’s top 100 real estate developers increased by 36.3% in June compared to May, while it dropped 16.7% from a year ago. This is an improvement from the 33.7% annual drop recorded in the previous month. Policymakers in May introduced a so-called historic set of support measures for the property sector that has been struggling recently and this data will no doubt be taken as a sign of its success.
Finishing Q2 on a positive note, data released by the HSBC final India Manufacturing Purchasing Managers’ Index on Monday revealed a rise in June to 58.3, slightly under forecasts but up from May’s three-month low of 57.5. Increased demand boosted the output and new order sub-indexes in June, with larger workloads creating more jobs.
Over in Ireland, the index of consumer prices grew by 1.5% year-on-year in June 2024, a smaller incline than May’s 2% increase. It is also the lowest reading since April 2021. In particular, energy costs declined while food and transport grew. Ireland’s consumer confidence also increased in June to 70.5 from 65.7 in May, reflecting positive sentiment generated from the recent ECB interest rate cut and an increase in the net wealth of Ireland’s household by €33.2 billion this quarter.
Still to come this week we have the UK election results, US initial jobless claims, Fed meeting minutes, non-farm payrolls and unemployment rate.
Nicola Tune, Portfolio Specialist
