European equities slip as investors await US retail sales data and earnings

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European stocks edged down on Tuesday, as investors awaited the release of US retail sales data as well as major banks’ corporate earnings, hoping to gauge the impact that rising interest rates have had on the world’s largest economy. 

Europe’s region-wide Stoxx 600 slipped 0.1 per cent, extending two successive days of losses, while France’s Cac 40 and Germany’s Dax fell by the same amount at the market open.

Investors traded cautiously a day after weak growth data from Beijing triggered a sell-off in European equities due to fears that global demand would suffer if China’s post-pandemic economic recovery ran out of steam. 

“The data weighed in particular on European equities, being generally more exposed to China,” said Jim Reid, head of global fundamental credit strategy at Deutsche Bank. However, he added, this weakness “wasn’t anywhere near as obvious in the US”.

Wall Street’s benchmark S&P 500 and the tech-focused Nasdaq Composite both hit fresh 15-month highs on Monday, as investor sentiment picked up amid an encouraging corporate earnings season. 

Attention is turning to major US banks, including Bank of America and Morgan Stanley, which report their earnings later on Tuesday, while tech heavyweights Tesla and Netflix are set to follow on Wednesday. 

Big banks started the earnings season last week on a strong note, with JPMorgan and Wells Fargo reporting forecast-beating profits for the second quarter, amid lingering investor concerns over lenders’ balance sheets following the collapse of several regional banks in the spring.

Contracts tracking the S&P 500 and those tracking the Nasdaq 100 were both down 0.1 per cent ahead of the New York open. 

Investors will also be watching the release of US retail sales data later in the day to assess how the country’s consumers have fared as the rate of inflation slowed, more than a year after the Federal Reserve began its aggressive monetary tightening campaign. 

Economists polled by Reuters forecast that the US Census Bureau will report a 0.5 per cent month-on-month increase in overall retail sales in June, up from 0.3 per cent in the previous month. 

Meanwhile, Asian equities slipped on Tuesday, with the Hang Seng index declining 2.1 per cent after Hong Kong markets resumed trading following a day-long halt triggered by a storm. 

China’s CSI 300 benchmark of mainland equities fell 0.3 per cent and South Korea’s Kospi slid 0.4 per cent. Japan’s Topix index was the region’s outlier, climbing 0.6 per cent.