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US economy runs hotter than expected

The US economy grew at a much faster pace than expected in the second quarter of the year, data released on Thursday showed. European stock markets were down across the board and the rotation out of US tech stocks continued. Meanwhile, Asian equity markets were mostly bouncing back on Friday. Gold was set to make a weekly loss, trading around USD 2370 ahead of Friday’s US personal consumption expenditures data and oil was likely to log a third straight weekly loss.

Date
Author
Shane Strowmatt, LGT
Reading time
5 minutes

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US gross domestic product (GDP) grew at an annualised rate of 2.8% in the second quarter when compared with the same period a year earlier. That was much stronger than economists had forecast and marked an improvement from the 1.4% growth rate in the first quarter. The solid growth comes despite are signs of slowing consumption and concerns in the labour market, with lay-offs increasing and the unemployment rate above 4%. Markets expect the Federal Reserve (Fed) - which had raised interest rates to a 23-year high of 5.25 to 5.5% in response to inflation shocks - to cut rates at least twice by December.

The rotation on Wall Street continues

Hot US economic growth wasn’t enough to prop up stocks on the Nasdaq on Thursday as small and mid-cap stocks continue to outpace tech giants in New York trading. The Dow Jones Industrial gained 0.2% and the S&P 500 closed 0.5% lower. The tech heavy Nasdaq-100 dropped 1.1%. After STMicroelectronics cut its guidance on Thursday, other chip-related stocks were among the Nasdaq’s biggest losers, including Arm Holdings, AMD, ON Semiconductor and Qualcomm.

Asian stocks mostly higher

In Tokyo, the Nikkei 225 was trading roughly flat after inflation data showed prices in the capital city increased modeately to 2.2% in July from 2.1% in June. Inflation in Tokyo is considered to be a leading indicator of national inflation. The Japanese yen was stable on Friday, trading around 154 versus the US dollar after strengthening versus the greenback most of the week. In South Korea, the Kospi was up 0.9% and Australia’s S&P/ASX 200 gained 0.8%. Hong Kong's Hang Seng Index was trading 0.2% higher, while the CSI 300 was essentially unchanged from the previous session’s close.

German business climate dips

The ifo Business Climate Index for Germany dropped to 87.0 points in July from 88.6 in June, marking a considerable decline in business sentiment across sectors. Both manufacturing and services contributed to the decline as did the climate for trade and construction. Manufacturing capacity utilization has fallen to 77.5%, six percentage points below the long-term mean. Germany’s DAX closed 0.5% lower on Thursday and the Euro Stoxx 50 lost 1.1%.

Corporate and macroeconomic calendars

Corporate news in focus: Quarterly figures from Holcim, BASF, Air Liquide, Mercedes-Benz, Bristol-Myers Squibb, Mastercard and Eni.

Economic data in focus: Bank of Russia interest rate decision, US personal consumption expenditures and University of Michigan Consumer Sentiment Index.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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