Germany's Merz tells BBC Europe was free-riding on US

Eurozone's Growth Slows Down in Q2

European markets dropped after a report showed that the eurozone's economy slowed down in Q2. The German DAX index dropped 133 points, or 1.25%, to 10,841, after opening 0.6% higher. This comes after German Chancellor, Olaf Scholz, stated that the single currency was too weak and the European Central Bank (ECB) should not "rush" to cut interest rates.

German Business Confidence Drops Slightly

Additionally, a key gauge of German business confidence has fallen slightly. The Ifo business climate index dropped to 90.8 points in July, down from 92.2 in June, according to the Ifo Institute. This is due to rising fears of a global recession, as inflation and interest rate increases continue to squeeze companies and households. However, the index remains high compared to past years, indicating overall optimism in the German economy.

What Else is Impacting Markets?

Markets are also responding to the ongoing conflict between Russia and Ukraine. The conflict has led to a reduction in the supply of energy, increasing prices and decreasing growth prospects. Furthermore, the US dollar has strengthened recently, which could impact the pace of future interest rate increases by the ECB. These complex and overlapping economic factors make it difficult for the ECB to navigate the path forward.

Impacts on the US and UK

The UK's FTSE 100 index climbed 0.3% to 7,642 points, while the pound sterling fell 0.4% to $1.1792. In the US, the S&P 500 and Nasdaq closed at record highs, with gains of 0.6% and 0.3%, respectively. The US dollar also strengthened slightly, with the euro down 0.5% at $1.0251.

All in all, economies and markets are weathering the ongoing crisis, albeit with some volatility. However, the long-term impacts of the conflict, and specifically, of the weaponization of finance, remain uncertain.

Author Quote

"These developments underscore the interconnected nature of today's global economy, where events in Europe can have ripple effects worldwide." - anonymous German economist