(February 7, 2017) European stock markets are moving higher, with the FTSE and DAX are outperforming, while Eurozone peripheral markets are little change and the Spanish IBEX is lower. Real estate sector stocks led the broader rise in Europe, while banking shares retreated for a second day as core yields continue to decline. Asian stock markets fluctuated and the Nikkei closed with a -0.35% loss. Hang Seng and CSI also closed in the red, while the ASX 200 managed a modest gain as the RBA kept policy on hold. U.S. stock futures are also moving higher, while oil prices are down from earlier highs and WTI is trading below USD 53 per barrel.
WTI retreated under $53, earlier logging a low at $52.70, which is the lowest level seen since last Wednesday. Prices are presently 0.25% down on the day, at $52.90. High inventories and rising U.S. shale production are presently tipping the balance, along with a stronger dollar today, which are presently outweighing OPEC-led supply trimming. Prices have been oscillating without direction for over a month now.
Growth in Europe is expected to climb especially in Germany where the Euro is driving exports. German exporters see 2.5% export growth this year, but warn that Trump’s defiance of consensus increases German export risks. The head of Germany’s BGA export-industry association said German Chancellor Merkel has pledged that she will fight for free trade. Boerner called President Trump’s initial actions “alarming” and that Germany needs to ally with U.S. export industries and “politically and economically” in Europe, Asia, Latin America and Canada”.
German Industrial Production Dropped More than Expected
German industrial production slumped -3.0% month over month. Expectations were for a 0.3% month over month gain. In the light of the very weak orders number from November, the actual correction of -3.0% in December production data clearly came as a surprise and meant production actually dropped -0.1% quarter over quarter in Q4 last year. Unless there is a downward revision to overall growth numbers for last year this suggests that consumption may have played an even larger role than anticipated in 2016.
In the U.S., the Fed’s Senior Loan Officer Survey showed little change in standards business loans in Q4, though some tightening on commercial real estate loans. Also, banks indicated demand for C&I loans was stable. Banks also indicated that standards on all categories of residential real estate mortgage loans were little changed. Demand for most types of mortgage loans weakened on net, amid mixed changes in standards and demand for consumer loans.