Economic uncertainties continue to pressure equities

European shares traded within a narrow range but closed lower yesterday, with the Euro Stoxx 50 Index falling 0.2%, as investors remained cautious amidst uncertainty surrounding global interest rates. Meantime, US markets were closed on Tuesday for the Fourth of July holiday and closed early on Monday. The major averages notched gains during Monday’s session which kicked off the start of a new month, quarter and half-year for the market. Investors now look ahead to the latest Federal Reserve policy meeting minutes on Wednesday for more clues on the path for interest rates, as well as May factory orders data. 

Summary for 05.07.2023 

• Asian equity markets fell on Wednesday, with Chinese markets under pressure from weak economic data rumblings of a renewed trade war with the US, while anticipation of more cues from the US Federal Reserve also kept risk appetite low. Shares in Australia, Japan, South Korea and Hong Kong also declined. 
• European equity futures were pointing to a cautious open while US futures edged lower this morning as trading resumes in a holiday-shortened week, with futures to the major US indices all losing about 0.1%. 
• Oil prices were flat this morning following the gains of the previous session as a highly uncertain outlook for the global economy and future energy demand outweighed the prospect of tighter supply due to output cuts by top exporters Saudi Arabia and Russia.  
• China’s service sector grew less than expected in June, a private survey showed on Wednesday, as soft exports and weak local demand raised more questions about an economic recovery in the country. The Caixin services PMI read 53.9 in June, weaker than expectations for a reading of 56.2 and below May’s reading of 57.1. A separate, official survey released today showed that overall Chinese business activity slowed substantially in June from the prior month, with the composite PMI falling to 52.5 in June from 55.6 in May.  
• Germany’s trade surplus narrowed to €14.4 billion in May, compared to a downwardly revised €16.5 billion in the previous month and lower than market expectations of €17.5 billion. It was the smallest trade surplus since last December, as exports fell while imports rose for the first time in three months. Purchases from EU countries increased 3.5% while those from non-EU countries shrank 0.3%. 
• Chinese leader Xi Jinping called on nations to spurn decoupling and the cutting of supply chains, one day after his nation imposed limits on exports of two key metals used to make chips to counter Western restrictions on Beijing. China wants to work with nations to “reject the moves of setting up barriers, decoupling and severing supply chains,” Xi said. “We should make the pie of win-win cooperation bigger and ensure that more development gains will be shared more fairly by people across the world.” 
• Greek Prime Minister Kyriakos Mitsotakis pledged to repay two years of bailout loans ahead of schedule in a confident signal to financial markets at the start of his second term in office. Mitsotakis won a resounding majority last month for another four years in office, giving his conservative administration a mandate to implement investor-friendly policies he’d touted during his campaign. That will mean chipping away at Greece’s €356 billion of debt, the highest relative to output in the euro area.   
• Grocery group Casino said it’s weighing a French-led plan to rescue the company against a rival offer led by a Czech billionaire that proposes a bigger equity injection. Casino outlined an offer made by a group known as 3F, led by three French businessmen. With the help of secured creditors, their offer would inject €900 million of fresh money into the business, although the equity portion is just €450 million. Under a rival proposal made by Czech financier Daniel Kretinsky and Marc Ladreit de Lacharrière’s Fimalac — both of which are existing shareholders — the company would instead get a €1.35 billion equity injection.