Germany 40 and FTSE end quarter higher despite weak overnight close
The Germany 40 (DAX 40) and the FTSE 100 indices finished lower overnight but still managed to end the June quarter with gains of 7.88% and 2.08% respectively.
While these gains are modest compared with those recorded by United States (US) indices, they likely feel like a ‘win’ for many, especially considering how low European indices were trading in early April.
Overnight weakness in the markets was driven by profit-taking after weak economic data was released in Germany and ahead of the 9 July US tariff expiry deadline. The declines came despite reports that the European Union (EU) may be close to reaching a trade deal with the US, and after the United Kingdom (UK) government announced that its trade agreement with the US had gone into effect overnight.
US–UK deal lifts trade hopes, but barriers remain
The US–UK trade deal includes a reduction in US tariffs on British car exports from 27.5% to 10%, and US tariffs on UK steel and aluminium will drop from 25% to 0%. However, a 10% baseline US tariff remains on other UK goods.
In exchange, US aerospace parts — including Rolls-Royce engines — will enter the UK tariff-free, while the UK commits to an $10 billion Boeing purchase.
European economic news and data updates
In recent economic news, European Central Bank (ECB) vice-president Luis de Guindos stated that the eurozone economy is stagnating due to ‘enormous and brutal uncertainty’ surrounding global trade policy. Weak German retail sales data for May of -1.6% month-on-month (MoM) versus 0.5% expected and cooler-than-expected German inflation for June of 2% versus 2.2% expected have reinforced this concern.
Looking ahead, this week’s key data point will be the EU inflation report released tonight.