European equities edge up as investors await US retail sales data and earnings

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European stocks edged up on Tuesday as investors awaited the release of US retail sales data and earnings from big banks in order to gauge the impact of rising interest rates on the world’s largest economy.

Europe’s region-wide Stoxx 600 added 0.2 per cent, recouping losses from the previous session, while France’s Cac 40 gained 0.2 per cent and Germany’s Dax was flat.

The cautious gains came a day after weak growth data from China 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 hit 15-month highs on Monday, as investor sentiment picked up amid an encouraging corporate earnings season.

Attention is turning to big US banks, including Bank of America and Morgan Stanley, which report their earnings 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 flat 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 slows, more than a year after the Federal Reserve began its aggressive monetary tightening campaign.

Economists polled by Reuters forecast 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 index of mainland-listed 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.