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European markets traded marginally higher Monday before falling into negative territory following a downbeat week, with the FTSE100 losing around 0.40% and the German Dax around 0.30%.
More negative came as the Ifo Business Climate indicator for Germany fell for the second consecutive month to 88.5 in June 2023, marking the lowest level since last December and well below market expectations of 90.7.
The recent decline underscored the persistent uncertainty surrounding the recovery in Europe’s largest economy, with manufacturers reporting falling new orders due to the dampening effect of global interest rate hikes on demand.
Also, the deterioration in demand conditions and manufacturing recession was already highlighted in the PMI data for June, so this just report certainly confirms that.
Today’s survey also showed that expectations for the upcoming months turned notably more pessimistic (83.6 vs 88.3 in May), while firms’ assessments of their current situation also turned more negative (93.7 vs 94.8).
By industry, sentiment deteriorated among manufacturers (-9.9 vs -0.6), service providers (2.7 vs 6.8), traders (-20.2 vs -19.1) and constructors (-20.1 vs -18.5). Ifo officials cited “Weak demand for industry, order backlog is falling.”
They also noted that “Industry export expectations are noticeably down, global rate hikes are dampening demand”. The EURUSD currency held around the 1.0900 during the European session.
Later this week the Eurozone Headline CPI Y/Y is expected at 5.7% vs. 6.1% prior, while there are no forecasts for the M/M figure as of now, although the prior number was 0.0%.
The Core CPI for the eurozone is seen at 5.5% vs. 5.3% prior and no expectations for the M/M reading, although the prior number was 0.2%. There’s also the Unemployment Rate being reported and expected at an unchanged 6.5% reading.
Recently, the ECB has made it pretty clear that a July hike is basically guaranteed unless there’s a material change in the data, while the September hike is much more debated and will depend on the data.
