Technology Stocks and Earnings Weigh on European Shares

European stock markets are heading south, following on from losses in Asia. The selloff in tech stocks which occurred in the U.S. continued on Friday fueled by Amazon’s report of a drop in profits. Earnings reports also weighed on the CAC 40 after Renault missed estimates and added to the woes of automakers. The failure of Trump’s health care repeal bill added to concerns about the President’s reform agenda, while a strong data round in Europe saw yields jumping higher, especially in the Eurozone and fresh tapering concerns are adding to pressure on DAX and Euro Stoxx 50, which are down.

UK Consumer Confidence Fell in July

UK July Gfk consumer confidence fell to -12, down from -10 in June and making lowest reading since July 2016, which was the month that followed the vote to leave the EU. Households’ view of the broader economic situation dropped to a four-year low. High inflation and weak pay growth, which is generating real declines in average household incomes, has been weighing on consumer spirits. The CBI business lobby group warned about this yesterday as a caveat to its above-forecast distributive trades survey for July.

Eurozone ESI economic confidence unexpectedly improved to 111.2 in July from 111.1 in the previous month. Industrial sentiment remained steady at 4.5 and services confidence improved to 14.1 from 13.3, while consumer confidence was confirmed at -1.7, down from June. All in all a better than anticipated reading that shows the impact of the surge in German confidence. Taking stock of July’s full round of confidence indicators, the number confirms that the Eurozone recovery remains on track on robust, but also shows some signs that things are stalling at high levels, rather than accelerating further.

German state data points to upside surprise in July HICP. Two of the heavyweights among the German states, Bavaria and NRW reported an unexpected uptick in the annual rate of 0.2% points, while headline rates were broadly steady in the other states. The data points to an upside surprise in the German HICP rate, which was expected to remain steady at 1.5% year over year, but could nudge higher to 1.6% year over year.

French, Spanish inflation numbers steady in July. French HICP remained steady at just 0.8% year over year in July, unchanged from June, while the Spanish HICP rate unexpectedly accelerated to 1.7% year over year from 1.6% year over year in June. The first German state inflation number from Saxony meanwhile also showed an unchanged annual rate at the start of Q3. So, the forecast for a steady German number remains intact, leaving the overall Eurozone HICP reading, out next week, on course to come in unchanged from June and at 1.3% year over year still far below the ECB’s upper limit for price stability of 2%.