Stocks Rebound as Correction Runs its Course

November 17
09:06 2017

European stock markets moved higher, following on from gains in Asia, where stock markets bounced back and the Nikkei jumped nearly 1.5%, as technology and telecom stocks led the way and a weaker Yen added support. Profit taking seems to have run its course and traders are left concerns about the progress of U.S. tax reforms and China’s slowdown and credit burden behind and refocus on positive corporate earnings. Tencent in particular jumped higher in Asia, in Europe Spanish homebuilders helped the IBEX to recover and outperform. The FTSE 100 underperformed as the Pound moved higher, while a dip in the EUR below 1.18 against the dollar helped the DAX to reclaim the 13000 mark.

WTI futures have settled above yesterday’s two-week low at $ 54.98, holding in the low-to-mid $ 55.0s so far today. Data showing rising U.S. crude inventories, along with expectations for more U.S. shale production, had been weighing on oil prices over the last few sessions, after a one-month rally from levels below $ 45.00. Market narratives are presently focusing in on the upcoming meeting of OPEC and other major oil producing nations on November 30. The expectation is that the group will announce an extension of its output curtailment accord, which is set to finish in March next year.

Eurozone October Inflation Remains Subdued

Eurozone October HICP inflation was confirmed at 1.4% year over year, with prices up 0.1% month over month. Core decelerated to 0.9% year over year from 1.1% year over year, as energy price inflation decelerated to 3.0% year over year from 3.9% year over year. Services price inflation also dipped as prices for package holidays declined. A weak number then that will have backed up the doves at the last council meeting, but impacted by special factors and survey indicators suggest underlying inflation pressures are starting to build up as manufacturing sectors in some countries are running into capacity constraints.

UK October retail sales beat forecasts, rising by 0.3% month over month versus the median forecast for a more modest expansion of 0.1% month over month. This followed a 0.7% contraction in the prior month. The year over year figure contracted by 0.3%, better than the median forecast for a 0.5% shrinkage, following an unusually strong rise in October 2016. The underlying trend remains one of growth, with the three-month on three-month measure rising by 0.9%. Sterling has rallied against the dollar and other currencies in the wake of the data release, as markets had been primed for a downside shock in light of weak BRC and CBI October surveys. The official data provides some relief, and follows yesterday’s UK labor market report that found wages ticking up a little more than expected, albeit still off the prevailing inflation rate, and unemployment remaining at a 40-year low.

This article was originally posted on FX Empire


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