The agreement reached by Angela Merkel and Interior Minister Horst Seehofer to resolve the political crisis around migration has boosted European markets and especially the German stock market.
On the macroeconomic front in Germany, the PMI index for the services sector rose in June to 54.10, the highest level in the last 4 months. In the Euro Zone, the PMI economic activity index rose from 54.10 in May to 54.9 in June.
Reuters reported that the US ambassador to Germany would have informed those in charge of some of the major automakers such as BMW, Daimler and Volkswagen that Donald Trump could abandon the threats issued last month if the EU eliminated taxes on imported cars from the USA. Remember that the US president threatened last month to impose a 20% import tariff on all vehicles manufactured in the EU.
The employment report showed that the US economy created 213,000 jobs in June, up from 195,000 expected by economists. However, the unemployment rate worsened from 3.80% to 4%, compared to the maintenance estimates for the previous month. In relation to average hourly wages, there was an annual increase of 2.70%, lower than the expected 2.80%.
European markets ended today’s session on positive territory. Concerns about trade tensions between the US and China softened slightly, allowing raw material producers to overperformance. In London, the market traded higher (0.95%) following the Brexit Minister’s resignation request, David Davis, and Foreign Minister Boris Johnson.
European stock markets closed higher as investors turned their attention to the upcoming earnings season, relegating the last political and trade tensions to second place. In sectoral terms, oil companies led the gains, boosted by rising commodity prices. Also on the rise were industrial and technological companies. In London, Marks & Spencer shares fell 0.61% on the day the retailer reported its results.
Most of the Asian stock markets ended low, with the Chinese market leading the losses. At issue was the news that the United States has produced an additional list of imported Chinese products amounting to USD 200 000 per year and threatened to impose tariffs already in September. In the Japanese market, losses were led by the sectors most sensitive to global trade issues, such as the automobile, while in China the most affected companies were the producers of raw materials.
European markets ended up higher, recovering from the losses recorded in the previous session. The media industry was among the best performers after the British government clarified the conditions for the acquisition of Sky's pay-TV platform by Twenty-First Century Fox. The oil sector ended virtually unchanged on a day when the price of oil fell again in international markets. Pharmaceuticals led the gains, with one of the German companies Gerresheimer posting an increase of more than 8% after announcing an extension of its business model and raising its growth forecasts.
European indices are in consolidation, favored by the performance of the US market and the outlook for the new Earnings Season that starts today in the US, with the disclosure of the figures of three of the largest financial institutions. Meanwhile, investors continue to monitor developments in trade tensions between the US and China.
In the pre-opening of the session, European indices retreated slightly, with investors focused toward company results on both sides of the Atlantic and the meeting between Donald Trump and Vladimir Putin after the US President met last week with Theresa May, British Prime Minister. Several economic studies indicate that the victory in a major football competition has a positive impact on the GDP (between 0.25% and 0.50%) of the winning country. This economic improvement has a positive effect on the stock market of the winning country, which tends to overperformance against the index of the other country finalist in the three months following the end of the competition. While recognizing that football events have a moderate and time-limited impact on stock markets, this type of study serves to confirm how much the emotions can determine the behavior of investors and economic agents. Thus, the French CAC40 index will be accompanied today in a more particular way.
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