Consumer confidence weakens across France and Germany

The July print of the German GfK consumer confidence index fell marginally, declining 0.8 points to a value of -21.8. Consensus expectations had been for an improvement in the headline measure to -19.5. Despite the modest tick down in confidence the measure has been on an upward trend for much of 2024, reaching a 26-month high in June.

French consumer confidence also saw a small fall, declining to a value of 89 in June from 90 the month prior. It is perhaps surprising that the fall wasn’t larger given the heightened political uncertainty in France following the snap election announcement at the beginning of June. The decline in the headline was driven by a drop in the outlook for the overall economic situation, which fell 4 points.

US new home sales fell to the lowest level since November 2023, declining 11.3% m/m in May, with affordability curtailing demand. Despite weak new home sales, the wider housing market appears to nonetheless be showing some improvement, with mortgage applications rising for three consecutive weeks. Applications rose 0.8% w/w in the week ending 21 June, driven by applications for new purchases rather than refinancing, while average interest rates for 30-year fixed mortgages declined marginally.

Today’s Economic Data and Events

• 15:00 TU One-week repo rate. Forecast: 50%
• 16:30 US GDP (Q1 third estimate). Forecast: 1.4% q/q annualised
• 16:30 US Initial jobless claims (w/e Jun 22). Forecast: 235K
• 16:30 US Durable goods orders (May). Forecast: -0.5% m/m

Fixed Income

• US treasury yields gained on Wednesday, albeit to different extents between maturities, as investors weighed hawkish comments from Fed speakers. The 2yr yield was broadly flat at 4.7472%, while the 10yr yield gained 8bps to reach 4.3294%.
• Moves in European bond yields were generally higher on Wednesday. The 10yr Bund yield gained 4 bps to 2.450%, while the 10yr Gilt yield rose 5bps to 4.1308%.

FX

• The US dollar advanced against a basket of major peer currencies again on Wednesday, with the spot index gaining 0.4%. EURUSD fell 0.3% to reach 1.0681 and GBPUSD declined 0.5% to 1.2622. The Yen weakened to its lowest level against the dollar since December 1989, with USDJPY ending the day 0.7% higher at 160.81, raising prospects of a further intervention in the currency.
• Moves in commodity currencies were more mixed. AUDUSD gained 0.02% to 0.6648, while NZDUSD declined 0.6% to 0.6083 and USDCAD rose 0.32% to 1.3702.

Equities

• Technology stocks gained once more on Wednesday, lifting US equity markets. The Dow Jones rose 0.04%, the S&P 500 gained 0.16% and the NASDAQ rose 0.5%.
• European equity indices moved lower on the day, with political uncertainty in France dampening sentiment. The Eurostoxx 50 fell 0.4%, the CAC 40 dropped 0.7%, the DAX declined 0.12% and the FTSE fell 0.27%.
• Regionally, the DFMGI gained 0.18% and ADXGI fell 0.57%.

Commodities

• Oil futures rose marginally on Wednesday, despite an EIA report showing stronger than expected crude stockpiles. Brent gained 0.28% to USD 85.25/b, while WTI rose 0.1% to USD 80.9/b.