Here are some highlights of news items you might have missed today.
German’s Business Confidence Fades Away in June
Some news from Europe gave evidence to the fact that more work is needed before the overall economy there gets on the right foot. In Germany, business morale fell to the lowest level this year, according to the IFO business climate survey of 7,000 executives, dropping to 109.7 in June from 110.4 in May.
The report “suggests that the German upswing will not accelerate further but may lose a little steam instead,” Holger Schmieding, chief economist at Berenberg Bank in London, told Bloomberg.
“Domestic fundamentals remain solid. We expect strong gains in employment, a major rise in real incomes supported by low inflation and buoyant construction to underpin economic growth of just above 2 percent for 2014 and 2015,” he added.
The importance of the German economy to overall European prospects means business confidence and other data coming out of that country will necessitate close watching in the next few weeks.
While German business confidence was waning, a report out of the U.S. indicated consumers were feeling better about things here. The Conference Board’s index rose to the strongest reading since early 2008. The index hit 85.2 in June, beating a Bloomberg survey of economists that predicted 83.5. Another indication that, economically, things are going in different directions in the U.S. and Europe.
Bank of England Chief Carney Dampens Rate-Hike Hopes
Also across the pond, Comments by Mark Carney, the Bank of England governor, dampened hopes, or fears, that interest rates could be raised as early as this year, saying that there’s little wage or inflationary pressures in the British economy.
That helped bring the sterling to below $1.70, the barrier it has just recently broken on the upside after earlier comments by Carney seemed to indicate rates could rise soon.
Carney was speaking before UK lawmakers. He and BoE deputies all emphasized that the UK economy still had spare capacity that needed to be used up before rates could rise. “The path of interest rates is likely to be limited and gradual,” he was quoted by the Wall Street Journal as saying.
Still, he didn’t take a rate hike off the agenda entirely,
“As the economy progresses, the time to normalize interest rates is edging closer,” he said. “We can’t tell you today exactly when that’s going to be.”
Vertex Pharmaceuticals Surging After Successful Tests
Meanwhile, back in the U.S., shares of Vertex Pharmaceuticals jumped more than 40 percent after it said that a combination of two of its drugs had successfully treated cystic fibrosis in clinical tests, potentially clearing the way for approval of a new option for nearly half the patients with the genetic disease.
The drug combination, when compared with a placebo, improved the lung function of patients and also reduced pulmonary flare-ups, which can lead to hospitalization, the New York Times reported.
The tests were being watched closely by Wall Street, with analysts saying that shares in the company could either soar or collapse depending on the results of the test. Those betting on a successful outcome won out this time, with the stock gaining more than $28 to $94.89 near midday.
“It’s not an exaggeration to say that billions of dollars in value, for Vertex and the overall biotech sector, hinge on” the results, Geoffrey C. Porges, an analyst at Sanford C. Bernstein & Company, wrote in a note last week, according to the Times report.
The End of Disinflation?
After three years, worldwide disinflation may be coming to an end, according to economists at JPMorgan Chase & Co. They estimate that global consumer prices rose 2.65 percent in May, the fastest since April 2012 and at a rate they did not expect to see before the end of this year, according to a Bloomberg News report.
“We definitely have seen the turn,” David Hensley, an international economist at JPMorgan, told Bloomberg. “It would be an abrupt swing to go to worrying about the inflationary upside, but we may be seeing that shift taking place.”
Excluding food and energy, inflation was still 2.1 percent, the report said.
The Money and Markets Team