London View

German Retail Sales Fall as Country Awaits IFO Report, Japan's Economy Stutters

Equity markets in Europe kick off the last trading session of June on an upbeat note despite a mixed session in Asia overnight. Emerging markets outperformed overnight, with the MSCI Emerging Markets Index adding 0.4%.

 

Improving US economic fundamentals seem to be signalling a rebound following faltering growth in the first quarter of the year. At the same time, weakness in the first quarter buys the Federal Reserve more time to keep interest rates at record lows for longer than expected after the bond-buying programme comes to an end.

 

Out already this morning, German retail sales saw a surprising fall, underwhelming market participants. The data showed retail sales fell 0.6% in May month-on-month, versus the 0.8% expected by the market. That doesn’t bode well for Tuesday’s German IFO report which will offer insight over sentiment and confidence in the euro zone’s powerhouse economy.

 

There were still worries about the situation in Iraq although oil prices have fallen slightly; violence in Iraq so far has largely been in the north of the country, while Iraq’s main oil wealth is in the south. Brent slipped to $113 a barrel overnight but is still up 3.3% for the month of June which is its third straight monthly gain.

 

Overnight in Asia, Japan's Nikkei 225 average fell 0.2% after factory output rose less than expected, calling into question how the economy is performing after the national sales tax was raised in April under PM Shinzo Abe’s reforms.

 

Australia's S&P/ASX 200 fell 0.4% after worrying inflation data showed an increase to 3% from 2.9% - the highest since July 2011. In China however, stock markets rose with Hong Kong's Hang Seng Index up 0.2% and the Shanghai Composite higher by 0.5%.