European equities experienced a gradual decline, with concerns surrounding global economic growth and forthcoming decisions on monetary policy by central banks weighing on investors’ minds. At 03:15 ET (07:15 GMT), the DAX index in Germany observed a modest 0.1% dip, while the CAC 40 in France slipped 0.2% and the FTSE 100 in the U.K. fell by 0.1%.
The release of data earlier during the session revealed an unexpected 0.4% decrease in German factory orders in April, highlighting the diminishing prospects for Europe’s largest economy. Germany recently weathered its first recession since the pandemic hit in the winter.
The final composite PMI index, regarded as a reliable measure of overall economic well-being, disclosed on Monday that the eurozone’s business activity received support last month from the dominant services sector, which counterbalanced the deepening decline in the manufacturing sector.
Across the Atlantic, the U.S. service sector experienced minimal growth in May, indicating that the significant expansion seen in this crucial sector may now be losing momentum in the face of rising interest rates and elevated inflation.
Market participants are increasingly anticipating the Federal Reserve to pause rate hikes in the upcoming week. However, the European Central Bank seems to be several months away from following suit, as inflation remains a pressing concern.
President Christine Lagarde emphasized this sentiment on Monday, reinforcing expectations for further rate hikes. The ECB is also scheduled to meet next week. Lagarde stated that it is premature to claim that core inflation has reached its peak, despite signs of moderation.
Australia’s central bank raised interest rates by 25 basis points overnight, cautioning that inflation in the country remains excessively high, and further tightening of monetary policy may still be warranted this year.
In the realm of corporate news, GSK (LON:GSK) saw a 0.3% increase in its stock value after receiving approval from the U.S. Food and Drug Administration for its cancer drug, Jemperli.
Associated British Foods (LON:ABF) witnessed a 0.2% decline in its stock following the company’s announcement of its acquisition of dairy technology firm National Milk Records for £48 million (£1 = $1.2441) to bolster its agri-food division. Associated British Foods is the owner of Primark, in addition to several food and ingredient businesses.
British American Tobacco (LON:BATS) enjoyed an uptick of 0.8% in its stock as the tobacco conglomerate maintained its annual revenue and profit forecasts, relying on sustained demand for its vaping and oral nicotine products.
On the commodities front, oil prices receded slightly on Tuesday, relinquishing a portion of the previous session’s substantial gains, as market participants redirected their attention to the weakening economic conditions in the United States following the Saudi production cut.
By 03:15 ET, U.S. crude futures traded 1.3% lower at $71.19 per barrel, while the Brent contract dropped 1.2% to $75.81.
Saudi Arabia, the world’s leading exporter, pledged over the weekend to further cut production by approximately one million barrels per day starting in July compared to May’s production levels. This move aimed to bolster declining crude prices.
Furthermore, gold futures experienced a 0.1% increase, reaching $1,976.05 per ounce, while the EUR/USD currency pair demonstrated a 0.1% rise, trading at 1.0723.