European stocks kick off June on a muted note after turbulent month

European shares kicked off June on a subdued note, following a turbulent month for global markets.

The regional Stoxx 600 index was broadly steady in early trading, while the FTSE 100 slipped 0.1 per cent lower and Germany’s Dax made small gains.

Those moves came as fresh data showed that German retail sales fell more than expected in April — falling 5.4 per cent month on month compared with expectations of a 0.2 per cent decline, as consumers contended with rapid price growth. German inflation for May was worse than economists had anticipated, according to figures released on Monday, hitting 8.7 per cent on an annual basis.

The muted European open on Wednesday also followed a volatile four weeks for global equities, with the S&P 500 finishing the month up 0.01 per cent after debate about US inflation, economic growth and the direction of monetary policy — along with disappointing results for bellwether retailers such as Target and Walmart — drove sharp swings. Futures contracts tracking Wall Street’s benchmark index added 0.2 per cent in European trading.

In Asian equity markets, Japan’s Topix rose 1.4 per cent on Wednesday. Hong Kong’s Hang Seng fell 0.6 per cent, as investors weighed the easing of coronavirus restrictions in Shanghai after two months of lockdown against growth concerns, after a private-sector gauge of Chinese manufacturing activity signalled a contraction for a third consecutive month.

Government bonds were steadier following a bout of selling in the previous session, as questions intensified about how far central banks would raise interest rates to curb inflation. Eurozone consumer price growth hit a record high in May, with concerns about inflationary pressures stoked by EU leaders agreeing a ban on most Russian oil imports.

Markets are poised for the European Central Bank to raise interest rates in July, with a move into positive territory expected by September. The bank’s main deposit rate stands at minus 0.5 per cent and has been negative since 2014.

The yield on Germany’s 10-year Bund, seen as a proxy for borrowing costs in the bloc, edged up 0.02 percentage points to 1.14 per cent, as the price of the debt instrument rose. The yield on the 10-year US Treasury note rose 0.03 percentage points to 2.87 per cent. The policy-sensitive two-year Treasury yield rose 0.05 percentage points to 2.59 per cent.

In currency markets, the dollar index, which measures the greenback against a basket of six currencies, gained 0.2 per cent. International oil benchmark Brent crude rose 1.7 per cent to $117.57 a barrel, having tipped over the $120 threshold for the first time since March earlier in the week.

Source: Financial Times

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