European shares edge higher ahead of Walmart earnings

European stocks made muted gains on Tuesday as investors looked ahead to closely watched earnings from US retail bellwether Walmart, after disappointing German data added to the sense of global economic gloom. The regional Stoxx 600 gauge added 0.2 per cent. Germany’s Dax rose 0.6 per cent, while London’s FTSE 100 rose 0.5 per cent.

Futures contracts tracking Wall Street’s S&P 500 lost 0.2 per cent. Those moves came as fresh survey results cast a pall over the outlook for Germany. Figures from economic research group Zew showed that investment professionals’ confidence in the eurozone’s largest economy had deteriorated again in August.

A reading of minus 55.3 for August was worse than the prior month’s figure and a consensus forecast of minus 53.8. Separate data on Tuesday showed that the EU recorded a trade deficit of EUR24.6bn in June, EUR4.6bn more than the expected EUR20bn but below the EUR26.3bn recorded in May. Central banks have in recent months indicated that monetary policy tightening strategies will be guided in part by signals given by economic data releases.

This has made market watchers pay more attention to individual data points than they have previously, said Altaf Kassam, Emea head of investment strategy and research at State Street Global Advisors. “It’s going to increase volatility and the worry is that will be magnified by lower liquidity in the summer,” he said. “Every data point is going to be scrutinised, which can lead to greater day-to-day volatility.” US housing starts data are due later in the day, giving an insight into new monthly residential construction in the country.

Walmart, the world’s largest retailer — widely perceived to be a bellwether of the US consumer — will also report quarterly earnings on Tuesday. Weak[1] figures from the company, along with department store chain Target in May sparked some of the biggest declines for US stocks this year. In Asian equity markets, Hong Kong’s Hang Seng index slipped 1.1 per cent, pulled lower by a drop in the shares of food delivery group Meituan after Reuters reported that tech group Tencent planned to sell all or a bulk of its 17 per cent stake in the business. That decline came despite a sharp rise in the shares of Chinese property companies[2], on reports that Beijing may order state-run groups to guarantee some developer bonds issued in the country’s onshore market.

A day earlier, Chinese shares had edged lower after economic data for the country showed retail sales and industrial output rose at a slower pace than economists had expected, further complicating the global growth outlook. China’s central bank on Monday cut its medium-term lending rate by 0.1 percentage points to 2.75 per cent. In commodities, Brent crude lost 0.9 per cent to trade at £94.27 a barrel.

A day earlier, the international oil benchmark had slipped more than 5 per cent to as low as £92.78 in the latest sign of recession fears stalking markets. US marker West Texas Intermediate was down 0.6 per cent on Tuesday at £88.89 a barrel, after sliding to its weakest level since early February on Monday — before Russia’s invasion of Ukraine. US government bonds were steady on Tuesday, with the yield on the benchmark 10-year Treasury note broadly flat at 2.8 per cent.

Germany’s equivalent Bund yield edged 0.04 percentage points higher to 0.94 per cent, as the price of the instrument — seen as a proxy for European borrowing costs — fell.

The dollar added 0.3 per cent against a basket of six other currencies.

References

  1. ^ Weak (www.ft.com)
  2. ^ sharp rise in the shares of Chinese property companies (www.ft.com)