By Dave Morris
European markets were modestly higher as markets began pricing in potential rate cuts from central banks stung by negative economic data reports.
How did markets perform?
The Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.16% improved 0.3% Tuesday to 371.6, adding to the 0.4% it gained Monday.
The U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.23% grew by 0.2% to 7,201.1. On Monday it closed up 0.3%.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.1619% was roughly flat, trading at $1.2665 on Tuesday after increasing 0.2% Monday.
In Germany, the DAX /zigman2/quotes/210597999/delayed DX:DAX +0.33% leapt 0.9% to 11,903.1, following its Monday improvement of 0.6%.
France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.08% edged up 0.2% to 5,251.1. It rose 0.6% Monday.
Italy’s FTSE MIB /zigman2/quotes/210598024/delayed IT:I945 +0.41% surged up 1.3% to 20,133.8, on top of Monday’s 0.4% increase.
What’s moving the markets?
The magnetic pull of U.S. market news is hard for European investors to resist. This time, European equities were affected less by U.S. FAANG (Facebook, Apple, Amazon, Netflix and Google) stocks slumping on reports of potential antitrust investigations than by the prospect of a rate cut by the U.S. Federal Reserve.
Yields on the 10-year U.S. Treasury bond opened at 2.0779%, which is 70.7 basis points down from their year-to-date peak on January 21. At pixel time they had recovered to 2.103%.
All eyes will be on Fed chairman Jerome Powell when he speaks Tuesday afternoon, given that many market observers see pressure on the domestic economy from U.S. President Donald Trump’s tariffs on China and Mexico and expect the Fed to intervene. On Tuesday, St. Louis Fed President and Federal Open Market Committee member James Bullard said the Fed may need to cut rates “soon”.
Euro area unemployment Tuesday came in slightly better than expectations at 7.6%. RBC Capital Markets argued, however, that the most important data point on unemployment in Europe was May 29’s seasonally adjusted German unemployment change data, which showed 60,000 more unemployed people than the month before.
Despite caveats about reclassifications affecting the result, RBC said the increase “represents a significant development in a labor market that has seen an almost continuous fall in the number unemployment over the past five years. And the Employment Agency’s commentary that ‘we are seeing the first signs of a weakening economy on unemployment,’ is also worrying.”
Which stocks are active?
News that U.K. fund manager Paul Woodford was suspending trading in his flagship investment fund following the exit of a key investor hit several related stocks. The former Invesco manager’s publicly traded entity, Woodford Patient Capital Trust PLC , slumped 11.2%. Online investment marketplace Hargreaves Lansdown PLC /zigman2/quotes/201025857/delayed UK:HL +1.57% , which had endorsed Woodford publicly and included his main fund in several of their portfolios, was down 6.2%. Shares in Purplebricks Group PLC /zigman2/quotes/203490954/delayed UK:PURP +0.32% , an online real-estate agent which Woodford had backed heavily, fell 4.5%
Oil benchmarks continued to sink after a rough couple of weeks. The West Texas Intermediate (WTI) crude oil benchmark was down 1.3% to $52.54/bbl, while the Brent crude benchmark sank 1.4% to $60.40/bbl. Airlines were the main beneficiaries of cheaper fuel prices, with Air France-KLM SA /zigman2/quotes/205396176/delayed FR:AF -0.70% jumping 3.4%, EasyJet PLC /zigman2/quotes/202825892/delayed UK:EZJ +5.02% climbing 3% and TUI AG /zigman2/quotes/207049334/delayed UK:TUI +0.23% rising 2.6%.