European equity markets opened the week on the negative side as mixed economic data weighed on market sentiment, prompting investors to some profit taking. The CAC and IBEX indices slid slightly lower, while the DAX and the London benchmark consolidated within the recent range, struggling for clear direction.
On the macroeconomic front, we received fairly robust US economic data. The US NY Fed manufacturing index surged to 19.28 in June compared to 14.69 in May, beating analysts’ expectations, while industrial output climbed by 0.6% in May compared to a 0.475 increase in April.
However, risk appetite was limited as the IMF unexpectedly cut the US economic growth forecast from 2.8% to 2.0% in 2014, citing a weak Q1 2014 for the country’s economy. IMF Managing Director Christine Lagarde reported today that extreme weather conditions hurt the US economy in the last quarter of 2013 and Q1 of 2014, adding that it sees scope for zero interest rates for longer than initially expected. The US dollar weakened on the news with the USD index falling near 0.2% towards the 80.4 level.
Eurozone data showed a further slowdown in the region’s inflation in May, as the cost of food and telecoms kept prices low. Inflation increased by 0.5% y/y in May and managed to hold below the key target of 1%. The Euro rebounded slightly, trading above 1.35 against the US dollar.
Smith & Nephew retreated by more than 1.5% in today’s trading session following news that Medtronic Inc. has agreed to buy orthopaedic rival Covidien instead.
Energy stocks posted fresh gains today as crude oil prices continued their recent upside rally amid persistent tensions in Iran. Tullow Oil, Petrofac and Royal Dutch Shell gained between 0.6% and 1.5%.