European markets open to close after Wall Street snaps losing streak

Germany’s ZEW economic sentiment indicator tumbled to -14.7 in July from -8.5 in June, below a consensus estimate in a Reuters poll of -10.5.

Across the euro area, economic expectations fell from -10 in June to -12.2 in July.

– Elliott Smith

Pay excluding bonuses in the UK grew at the fastest rate ever in the three months to May, rising by 7.3% on the same period last year, the Office for National Statistics revealed on Tuesday.

The country’s tight labor market showed signs of easing as the unemployment rate rose unexpectedly from 3.8% to 4% in the three months to April, while vacancies continued to fall. The employment rate rose to 7.6% on the back of an increase in part-time work.

The economic inactivity rate fell from the previous quarter to 20.8%, continuing a recent downward trend.

Stuart Cole, chief macro economist at Equiti Capital, said the Bank of England would welcome the fall in paid employment and the rise in jobless claims, suggesting the labor market is finally starting to shed jobs.

However, he said the strength of the earnings numbers would remain “worrying” for policymakers, suggesting that monetary policy may need to tighten further to curb core inflation.

“These figures show that workers are still managing to secure big pay rises despite the apparent cooling in the labor market as a whole, possibly reflecting attempts by companies to keep skilled workers from leaving, but also suggest the softer market the headlines suggest. may not be seen on the ground,” Cole said.

The Bank of England has repeatedly warned that high wage growth remains a significant obstacle to its efforts to bring down inflation, and today’s figures will do nothing to convince it that the labor market is no longer about to run hot, something which may lead it to conclude that monetary policy needs to be tightened further.

Jack Kennedy, UK economist at employment platform Indeed, suggested a drop in single-month wage growth for May from 7.7% to 7.1% suggested April “may have been the peak for wage growth after that month’s 9.7% rise in the National Living Wage.”

However, he agreed that the Bank of England’s monetary policy committee will need to see evidence of moderating wage growth “sooner rather than later” to dissuade it from “further and perhaps significant” interest rate rises.

– Elliott Smith

European shares opened in positive territory on Tuesday, following gains around the world after Wall Street snapped a three-day losing streak.

The pan-European Stoxx 600 rose 0.5% in early trade, with construction and materials shares climbing 1.4% to lead gains as most sectors and major bourses moved into positive territory.

– Elliott Smith

Britain’s FTSE 100 is set to inch around 3 points higher at 7,277, Germany’s DAX is seen around 35 points lower at 15,738 and France’s CAC 40 is expected to gain around 28 points to 7,172, according to IG data.

The shares have risen sharply so far this year. But the impressive return has also made some investors nervous about the market’s ability to hold on to the gains for the rest of 2023.

CNBC Pro surveyed 15 market strategists at investment banks and asset managers between July 3 and 7, asking them to lay out what they expect from equity markets in the second half of this year. The respondents also shared their views on how investors should be positioned and the most important market risks.

While some said they expected stocks to continue rising, others were more skeptical, suggesting investors are bracing for the S&P 500 to fall 10% by the end of the year.

CNBC Pro subscribers can read more here.

– Ganesh Rao

Major economies in the region may begin to “disengage” from a global tightening cycle led by the Fed due to different macroeconomic conditions in Asia, Nomura economists said.

“Our view of Asian central banks cutting policy rates ahead of the Fed in this cycle is based on the fundamental differences between Asian and US economies,” Nomura economists wrote in a Friday note.

According to a real-time survey conducted by Nomura’s research team, more than 32% of respondents said they expect South Korea’s central bank to be the first to cut interest rates after China, followed by Indonesia, the Philippines and then India.

– Jihye Lee

China will extend two fiscal policies supporting the real estate market until the end of 2024.

In a statement, the People’s Bank of China referred to a 16-step guideline issued last November to strengthen policy support for the housing sector. The country will now extend the relevant guidelines until the end of the year.

Xinhua reported that the purpose of the move is to “guide financial institutions to continue deferring loan payments for real estate enterprises, while providing financial support to the real estate enterprises to ensure the delivery of housing projects.”

– Lim Hui Jie