Good Morning.


European indices traded flat yesterday with the Euro Stoxx 50 recording only a slight increase of 0.07% to end the day’s trading at 3284.81. This performance was similar to that of the French CAC 40 which was up by only 0.06% to close at 4518.34. The largely diversified Stoxx Europe 600 lost 0.2% in value as it closed at 345.57. The IBEX 35 slipped marginally; shedding 0.11% to end the day at 11105.90 whilst the FTSE recorded the largest drop of 0.2% to close at 6787.07. Contrary to that, Germany’s DAX recorded the highest upward movement for the day, adding 0.17% and closing at 9938.08 even though the data published throughout the day showed that business confidence in Germany dropped to the weakest levels since the turn of the year. This could be a slowdown indication in the Eurozone’s growth engine, however more data would be required for surety. The German Business Climate Index fell from 110.4 in May to 109.7 in June. The expectation was for a marginal drop of 0.1.

This added to yesterday’s disappointing news that the gauge for German manufacturing and services activity published two days ago showed slower growth than that expected by analysts. This was also seen in France. Such results from these European powerhouses show that the Euro area is indeed struggling to sustain its recovery. Meanwhile, the German Bundesbank was positive, saying that its economic outlook was promising whilst the ECB is relying on unprecedented stimulus to fuel growth and inflation of the currency bloc. That being said, the Bundesbank expects that Germany’s pace will pick up again in the second half of the year, projecting a GDP increase of 1.9% in 2014, 2% in 2015 and 1.8% in 2016.


The major US indices traded in negative territory overnight, dropping a second day from record levels, as reports of escalating violence in the Middle East overshadowed positive data. The S&P 500 was down 0.64%, ending trading at 1949.98 whilst the Nasdaq and the Dow Jones dropped 0.42% and 0.7% to close at 4350.35 and 16818.13. The conference Board’s US Consumer Confidence Index showed a monthly increase this month which also beat projections, however this news alone was did not seem enough to push the markets into positive territory. The fact that house sellers in US cities are losing some of their pricing power, which could be interpreted positively, was also not enough to push markets into the green. The S&P/Case-Shiller index of property values increased by 10.8% from April 2013. This was the smallest 12-month gain in more than a year. The US Commerce Department also reported that sales of new single-family homes rose 188.6% in May. The seasonally adjusted rate is the highest since the start of the recession. This also beat economists’ expectations.

As opposed to the equity performance, US government treasuries rose yesterday on the back of greater demand for longer-term maturity securities indicating a flight to safety, as concern in the Middle East continues to increase. The benchmark 10-year US dropped four basis points to 2.59% whilst the yields on the longer 30-year bonds shed five basis points to earn 3.41%.

The data that has flowed over the past few days in Europe and the US has led to mixed investor feelings. This was greatly reflected by the sideways trading of market indices, especially in Europe which may have started to see signs of a slowdown yet again. Furthermore, the growth in uncertainty in the Middle East is encouraging investors to be more cautious and this was evident from the performance in Treasuries.

Have a Great Day,