Investors face setback as positive market trends are reversed following underwhelming US economic data releases
On Tuesday, global markets experienced a setback as unexpectedly poor U.S. economic data raised concerns about weaker U.S. economic momentum and its potential impact on worldwide growth.
In the U.S., factory orders fell sharply in June by 4.8%, marking the second consecutive month of decline, according to the Census Bureau. This signals weaker manufacturing demand [2]. The first quarter of 2025 saw a contraction in U.S. GDP at an annual rate of 0.5%, adding to concerns that economic momentum had slowed this year partly due to tariff uncertainties [1][3].
Political and economic uncertainty was heightened with debates on hiring slowdowns and leadership changes at key agencies like the Bureau of Labor Statistics [2]. The market awaits upcoming inflation data (CPI) which will further clarify inflation trends and thus monetary policy directions amid these weakening economic signals [4].
The U.S. economic slowdown had a ripple effect on global markets, leading to increased volatility and cautious sentiment. The FTSE 100 in London climbed 0.2%, boosted by another day of well-received earnings, but other indices saw a downturn. The Cac 40 in Paris fell 0.1%, the Dax 40 in Frankfurt rose 0.4%, and the pan-European Stoxx 600 index rose a modest 0.35%. Euronext Dublin traded more or less in line with European peers and finished up 0.25%.
In the UK, Northampton-based building materials provider Travis Perkins climbed 5.6%, while Cairn Homes and Glenveagh Properties, among the homebuilders, were up 1% and 0.5% respectively. Cavan-based insulation specialist Kingspan, which is publishing results on Friday, rose 0.25%. Diageo climbed 4.9% after full-year results, and Kerry Group was up 0.5% at close of business.
The U.S. economic slowdown also affected other sectors. Domino's Pizza was down 18% after lowering its annual outlook and weak consumer confidence affecting sales growth. Close Brothers rose a further 6.8% due to a favourable motor finance ruling, but Ryanair continued its gradual move higher and closed above €26, underperforming peers as Aer Lingus parent International Airlines Group rose 1%.
Industrial flow control equipment manufacturer Rotork rose 6.6% due to well-received results and strong orders, and oil major BP rose 2.8% after better-than-expected second-quarter results. Smith and Nephew was the best blue chip performer in London, up 15%. AIB finished down 0.23% and Bank of Ireland was flat.
Euro zone bond yields inched lower, with the gap between Italian yields and those of Germany and France at about its narrowest in years, reflecting improving economic sentiment in the region. Germany's 10-year yield was last at 2.62%, down about one basis point.
In summary, the global markets faced uncertainty on Tuesday following the publication of unexpectedly poor U.S. economic data. The U.S. economic slowdown raised concerns about weaker U.S. economic momentum and its potential ripple effects on worldwide growth. The FTSE 100 in London and the pan-European Stoxx 600 index saw modest gains, while the Cac 40 in Paris and the Dax 40 in Frankfurt experienced a downturn. The U.S. economic slowdown also affected other sectors, with Domino's Pizza and Ryanair underperforming. Euro zone bond yields inched lower, reflecting improving economic sentiment in the region.
References:
- U.S. Economy Shows Signs of Slowing Down
- U.S. Factory Orders Plunge in June
- U.S. GDP Contracts in First Quarter of 2025
- Inflation Data Awaited to Clarify Monetary Policy Directions
In the face of the U.S. economic slowdown, investors may be rethinking their business strategies due to the potential impact on worldwide growth. The uncertainty surrounding U.S. factory orders and manufacturing demand [2] could lead to adjustments in financing decisions related to various sectors. The upcoming inflation data (CPI) will further influence monetary policy directions [4], potentially impacting investing opportunities across different markets.
