It may only be February, but many of the major global stocks indices put in their best weekly performance last week – and Friday’s session itself wasn’t too shabby either. The momentum started to build in the European session when data came out showing stronger-than-expected economic growth and an acceleration from the third quarter.
Growth was 0.3 per cent in the eurozone (0.4 per cent in the EU28) for the fourth quarter, only a bit up from the 0.2 per cent expectation but firmly above zero and the previous quarter’s 0.1 per cent growth rate. Remember, this is Europe and 0.3 per cent isn’t too far from average. In fact on some measures it is average. On the breakdown, German growth was 0.4 per cent, French 0.3 per cent, Italian 0.1 per cent, Spanish 0.3 per cent, while in Portugal growth was 0.5 per cent.
The Brits then informed the world that construction output surged 2 per cent for the quarter to be 6.3 per cent higher annually but that’s where the good news ended. Not that Michigan University reported a bad consumer confidence report as such (unchanged at 81.2 in February) but it wasn’t good news. US industrial production was weaker however, although investors are ignoring it as weather distorted. For what it’s worth, industrial production fell 0.3 per cent in January after a rise of that magnitude the month prior.
Global equities were higher on both sides of the Atlantic with the S&P500 up 0.5 per cent (1838) and the Dow rising 127 points (16,154) although the Nasdaq was flat, or 0.1 per cent higher (4244). Over in Europe gains were generally pretty good as well, although the FTSE100 underperformed with a 0.1 per cent gain. Otherwise the Dax rose 0.7 per cent and the CaC was up 0.6 per cent.
Rates sold off slightly, the US 10-year note trading 4 bps higher in yield to 2.74 per cent. The 10-year is at 2.75 per cent, the 5-year at 1.52 per cent and the 2-year at 0.32 per cent.
Forex moves saw the Australian dollar punch higher, recovering after last week’s jobs report. This morning the unit sits comfortably above 90 US cents (90.49) which is about 60 pips higher than Friday afternoon. Still plenty of upside for the undervalued Aussie dollar – it’s running very cheap. The British pound was the key outperformer for the session though, rising 115 pips to 1.6762. Otherwise the euro is about 25 pips higher at 1.3706 and the yen is virtually unchanged at 101.7
Commodities were mixed although precious metals saw a strong bid, especially silver which was 5 per cent higher. Gold then rose $18 to $1318 which is a three-month high. Otherwise for crude, Brent was up 0.3 per cent ($109.1) while WTI was up 0.1 per cent to $100.4.
Elsewhere we saw ratings agency S&P suggest that Australia has one of the least-risky banking systems in the world. Just one more reason to buy our banks – which, let’s face it, are still cheap on reasonable earnings assumptions. Over in Europe, the trade balance was in surplus to the tune of €13.7 billion. Finally, the US import index rose 0.1 per cent in January to be 1.5 per cent lower annually.
In markets this week, Aussie news is light and includes car sales today at 1130 AEDT. Wages on Wednesday is the only other release but with wages well-contained there isn’t likely to be a lot of excitement around that one. Globally, the key US data come out later in the week, including housing starts, existing home sales, inflation (PPI and CPI) and the Federal Reserve minutes. There is a swathe of Fed speakers out as well – Dennis Lockhart, James Bullard and John Williams. Other than that we see the German ZEW survey and there is a ‘flash’ estimate of China’s manufacturing PMI on Thursday.
Have a great day…
Adam Carr is a leading market economist.
Follow @AdamCarrEcon on Twitter.