The Thanksgiving holiday saw US markets closed last night, so the action was concentrated in Europe. Markets there had a decent session, the Dax hitting a new record with a 0.4 per cent gain, while the CaC was 0.2 per cent higher. Not huge gains but then again these are records.
The Europeans certainly have cause for joy as the economy is clearly improving. Well, for the Germans it’s more the case that their economy is doing very well indeed. The unemployment rate for instance at 6.9 per cent in November remains unchanged at its lowest point, or around there, in about two decades.
Then we saw an improvement in the European confidence indicators. The economic confidence index rose to 98.5 in November from 97.7, just below the average of 100 and the highest reading in over two years. The business climate indicator overall was up to 0.18 from -0.08 – the seventh consecutive rise and the highest reading since September 2011. So that’s all good and well and drove the gain in European stocks, and it also helped see the euro up about 30 pips to 1.3603.
UK stocks underperformed that, though still had a positive session – just. The FTSE100 closed up 0.1 per cent with the market hit by some big falls in some of the building stocks. The problem here is a decision by the Bank of England to refocus the Fund for Lending Scheme (a scheme that subsidises bank lending). This had been set up to boost the housing market, and lending more broadly, but now the bank wants to focus on lending to small business. The Canadian head of the Bank of England, Mark Carney, suggested that it was no longer appropriate to have a foot on the accelerator for the housing market, and that they would take much bigger steps to contain the housing sector if needed. Regulators even suggested they could, if they wanted, make banks test a borrower’s ability to withstand interest rate rises – a novel thought.
There were a few other bits and pieces, not much though. For the price action, the Australian dollar is at 0.9113 which is about 10 pips lower than yesterday afternoon. The yen is at 102.25. S&P500 and Dow futures are about 0.2 per cent to 0.3 per cent higher and Aussie bond futures about a tick higher apiece. Finally in the commodity space, Brent is down 0.7 per cent to $110.7.
That’s brings us to the data – again there wasn’t much in addition to the eurozone confidence indicators. Just German inflation, which shot back up to 1.6 per cent year-on-year in November from 1.2 per cent. Finally, the Spanish government confirmed that its economy just managed to crawl out of a recession in the third quarter, with growth of 0.1 per cent.
For our market today, the SPI suggests it’ll be a quiet one, with that index up about 2 points. Otherwise the key data release domestically is private sector credit which we see at 1130 AEDT. Elsewhere for the region we see Japanese employment figures and industrial production. This evening we see German retail sales, eurozone inflation, and a minor US manufacturing survey – the Milwaukee NAPM. Don’t forget that it’s half-day trading for the US tonight as well.
Have a great weekend…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.