Europe
European stocks treaded water on Tuesday as remaining concerns over the implementation Greece’s bailout agreement and tepid economic data took the edge off optimism that had been built up since signs of a deal in Greece first emerged last week.
German investor confidence slipped for the fourth month to 29.7 in July from 31.5 in June according to ZEW reflecting unease at the possible impact of a Greek exit from the Eurozone. Eurozone industrial production dropped back to a 1.6% year-over-year increase in May from 2% in April.
Bank of England governor Mark Carney didn’t give too much away on the timing of a rise in UK interest rates when questioned by the Treasury Select Committee but his comment that the time for a rate hike was “moving closer” was taken as a hawkish shift in tone.
Coming off three straight days of gains, the FTSE 100 was flat at its 200 day moving average on Tuesday as the prospect of higher interest rates and tomorrow’s Greek parliament vote weighed on sentiment.
UK oil majors BP (LONDON:BP) and Royal Dutch Shell (LONDON:RDSa) erased early losses caused by the agreement over Iran’s nuclear program. The removal of sanctions in Iran could help BP and Shell ramp up operations within the country so since oil prices rebounded as well, there was little reason for the shares to trade lower.
Shares representing the UK property sector including Taylor Wimpey (LONDON:TW) and Persimmon (LONDON:PSN) were worst performers on negative implications for housing demand if mortgage rates were to go up alongside a rate hike from the Bank of England.
Shares in SKY PLC (LONDON:SKYB) moved higher on a broker upgrade but betting company William Hill and media company ITV (LONDON:ITV) were on the other side with a broker downgrade sending shares lower.
US
US stocks opened lower on Tuesday as the initial snap reaction higher to the deal in Greece faded. There are concerns over the longevity of the package given the harsh implications for growth as well as the near-term risk that the deal will not be approved by the Greek parliament.
US retail sales fell 0.3% when a rise of 0.3% was expected while core prices fell by -0.1%. This is the weakest retail sales number in four months and has stoked concerns of a slowdown at the end of the second quarter for the US economy.
Banking shares JP Morgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) opened higher on well received second quarter earnings reports.
Shares of Micron Technology Inc (NASDAQ:MU) traded higher after Chinese Chip Maker Tsinghua Unigroup made a bid for the company worth $23bn.
FX
The US Dollar was lower on Tuesday, not helped by a surprise drop in US retail sales to the worst number in four months.
The British pound traded higher after BOE governor Carney said the time for a rate hike moving closer, although inflation dropped to 0% YoY in June. GBP/USD broke 1.56, taking out yesterday’s high.
The euro bounced higher after German ZEW investor confidence dropped less than expected in July, expectations are for a rebound next month now that the Greek crisis is (nearly) resolved. A decline in Eurozone industrial production to 1.6% YoY in May tempered gains.
Commodities
Crude oil prices initially sank on news that a deal had been brokered between Iran and six global powers to restrict the country’s nuclear program in exchange for the loosening of economic sanctions. Oil pared losses towards the afternoon as traders bought on the news that of a deal which had been priced in since the beginning of July. The smart money that had been short crude ahead of the announcement took profits before API inventory data was released that could have shaken up the current sentiment that US production is increasing.
Gold and silver drifted lower on Tuesday alongside base metals, despite some dollar weakness.
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