This difference was also reflected in the financial markets: shares of major US companies rose, European stock indices fell, and energy resource prices rose significantly. If they remain at the current level, cost pressures, which had recently begun to ease, may strengthen again.
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The US services sector remains optimistic, Europe more cautious
In June, the US ISM services sector index fell from 54.5 to 54.0 points but remained clearly in the growth zone. Growth in new orders and business activity slowed, but companies reported an increase in the number of employees for the first time in four months. As in the manufacturing sector, with falling oil prices, cost and price growth slowed in US service companies in June.
The situation in Europe remained much more restrained. Although sentiment in the eurozone services sector improved in June, the PMI index rose only to 49.4 points and remained below the 50-point threshold separating growth from contraction.
In China, optimism in the services sector slightly decreased in June—the index was 54.1 points, although an improvement was recorded a month earlier. Importantly, price pressures decreased in all three regions. This creates more favorable conditions for more stable economic growth in the coming quarters.
Eurozone retail trade continues to fluctuate
In May, retail trade volume in the eurozone increased by 0.2% month-on-month after a 0.3% decline in April and was only 0.5% higher than at the end of last year.
The situation varied across countries. Retail trade volume grew month-on-month in about half of the eurozone countries, including Germany and Spain, while it decreased or remained unchanged in others. These included Italy, France, and the Baltic countries.
Compared to the same period last year, eurozone retail trade volume was 1.6% higher. This indicates moderate but uneven consumption growth in the region—there is no clear upward trend yet, despite slowing inflation and improving purchasing power.
Markets – different directions in the US and Europe and a jump in energy prices
Shares of major US companies rose last week. The technology-heavy Nasdaq Composite index rose 1.7%, and the S&P 500 by 1.2%. Meanwhile, the small-cap Russell 2000 index fell 0.6%, so stock market growth was concentrated in the largest companies.
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European stock indices, on the contrary, fell in all major markets: Germany’s DAX lost 2.8%, Spain’s IBEX 35 – 2.4%, Euro Stoxx 50 – 2.2%, France’s CAC 40 – 2.0%. A decline of similar magnitude across different countries indicates that this is a regional trend rather than isolated market movements.
The biggest weekly changes were recorded in energy markets. Brent crude oil prices rose 5.9% to about 76 US dollars per barrel, and European TTF natural gas prices jumped 10.5%.
Falling oil prices in June helped slow inflation on both sides of the Atlantic, but last week’s price increase reminds us that the decline in energy prices will not necessarily be uniform. More expensive energy is more unfavorable for European industry, which depends more on imported gas than the US. This partly explains the weakness of the region’s stock markets.
Currency market changes were much smaller. The euro exchange rate against the US dollar changed little and stood at 1.1430, while the gold price ended the week essentially stable.
What to watch this week
The most important event for financial markets this week is the release of US June inflation data on Tuesday. It is forecast that consumer prices changed little month-on-month, and annual core inflation will remain at 2.9%.
On Friday, final eurozone June inflation data will be published, expected to confirm 2.8% annual inflation and 2.4% core inflation. Both indicators will remain above the European Central Bank’s 2% target.
On Thursday, US retail trade data will show whether consumer spending is beginning to slow after a strong spring.
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