Stocks Continue to Rise as the Holiday Season Commenses

European stock markets moved higher as risk appetite picked up and bonds sold off on strong survey data out of Germany and Japan, which underpinned optimism about the world growth outlook. The DAX was up 0.90%, and above 13100, Italian and Spanish markets outperformed and the Euro Stoxx 50 gained 0.72%. The FTSE 100 underperformed, but also managed to recover early losses and is now up 0.02% on the day. Most Asian stock markets also moved slightly higher and rout on Chinese bond and stock markets that dominated Thursday’s session faded. Oil prices rallied with the WTU future trading at 58.83 per barrel as U.S. stock futures also move higher.

German Ifo reading jumps to 117.5, the highest since at least 20 years, and more importantly perhaps, led by a jump in the current conditions indicator to 111.0 from 109.1, which more than compensated for the slight dip in the forward looking expectations reading. Following on the heel of the much stronger than expected PMI readings the number will add to pressure on Draghi to defend his decision to extend QE again and not commit to an end date for QE.

ECB’s Coeure: Deposit rate to stay at -0.4% for a long time. The comments from late yesterday tie in with the ECB’s guidance on the sequencing of exit steps, which stress that rate hikes will only come on the agenda well after the end of net asset purchases. These will end in September next year at the earliest, so rate hikes are unlikely to become an issue until 2019. Coeure also stressed that the Eurozone recovery is robust and homogeneous.

EU’s Juncker said “we’ll see” with regard to Brexit talks, saying that progress is being made and the December 4 meeting with PM May will decide whether sufficient progress has been made on divorcing terms. May, meanwhile, retorted to platitudes, saying that “we must step forward together, for both the UK and European Union to move on the next stage.”

Japan November manufacturing PMI rose to 53.8 in flash estimate, best since Mar 2014.

Japanese manufacturing activity expanded at the fastest pace in more than three years in November as output, new orders, and new export orders all accelerated. The Markit/Nikkei Japan Manufacturing flash Purchasing Managers Index rose to 53.8 in November on a seasonally adjusted basis from a final reading of 52.8 in October. The flash index for new export orders rose to 54.5 from a final 52.3 in the previous month to reach the highest since December 2013, helped by recent weakness in the yen. Input prices rose at a much faster pace than October, fueled by higher material prices and the cheaper yen, but the survey suggested manufacturers were only able to pass on a small portion of the hefty cost rises to their customers.