Producer and import prices in Switzerland were flat last month, data released at the end of last week showed. Signs were mounting that inflation is easing not only in the Alpine country but also on the other side of the Atlantic in the world’s largest economy. After a strong week, US equity markets took a breather on Friday. Meanwhile, the Chinese economy is losing momentum.
The Swiss Producer and Import Price Index was unchanged in June when compared with the previous month, data released Friday showed. Prices for the whole range of domestic and imported products was down by 0.6% when compared with the same month a year ago. Producer prices are watched as an indicator of the inflationary trend in a country as they tend to lead consumer prices. The inflation rate in Switzerland decelerated to 1.7% year-on-year in June, a much lower rate than in neighbouring European countries, such as Germany, where inflation is currently 6.8%. Nevertheless, the Swiss National Bank (SNB) raised interest rates in June by another quarter of a percentage point in an effort to fight inflation.
Also on Friday, more data was released supporting the narrative that inflation in the US is on its way down. Import prices in the world’s largest economy fell by 0.2% last month. The data came in the same week that data was released showing consumer and producer price increases were decelerating in the world’s largest economy.
Equity celebrated the slow inflation solid gains during the week. On Friday, however, stock markets in New York took a breather. The Dow Jones Industrial climbed by 0.3% and closed at 34'509.03 points. The S&P 500 fell 0.1% and ended the week at 4505.42 points. The Nasdaq Composite lost 0.2% to 14'113.70 points.
In individual stocks, JPMorgan Chase kicked off the second-quarter earnings season with revenue and net interest income coming in well ahead of market expectations. The bank’s shares gained 0.6%.
The Chinese economy is growing more slowly than expected. Gross domestic product rose by 6.3% year-on-year in the second quarter of the year, as the statistics office in Beijing reported on Monday. Growth was thus slightly better than at the beginning of the year, although analysts had expected a stronger increase.
The Chinese stock markets react with losses to the economic data. The Shanghai Composite is down 1.2% in Monday trading and the Shenzhen Component sheds 0.9%. Hong Kong markets will likely be closed all Monday due to a typhoon warning. Japan’s markets are closed for a holiday.
Corporate news in focus: Richemont Q1 revenue (07:30 CET).
Economic data in focus: ECB President Christine Lagarde speaks at an event in Frankfurt on Eastern Europe (10:15 CET), Empire State Manufacturing Survey USA (14:30).
All about global economic and market trends at a glance
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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
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Definition of rating categories of S&P and Moody’s which are relevant for us:
AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates
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