Asian Shares Soar Buoying Europe Briefly

European stock markets are narrowly mixed, after a very strong session in Asia, where optimism on corporate earnings, a surge in oil prices and Trump’s call on North Korea to “make a deal” helped Nikkei, Hang Seng and ASX 200 to post gains of more than 1%. Japan outperformed amid a weaker Yen and the Nikkei 225 rose to the highest level since 1992. The buoyant mood in Asia helped European markets to post early gains, but a mixed back of data releases coupled with disappointing earnings reports from BMW AG and Associated Foods Plc weighed on European bourses, which fluctuated near two-year peaks. Oil prices hovered near the highest level this year amid the political changes in Saudi Arabia.

Demand for Eurozone bonds in particular remains high as today’s German I/L auction saw a strong bid to cover ratio of 3.7. Limited supply, catch up demand from the ECB which had to scale back purchases last week due to a holiday and reinvested redemptions for public sector holdings alone this month all underpin demand.

Eurozone Retail Sales Rose in September

Eurozone retail sales rose 0.7% month over month, slightly more than anticipated and with August revised up to -0.1% month over month from -0.5% month over month, the annual rate reached a very strong 3.7% year over year in September. Still, on a quarterly basis sales slowed down 0.6% quarter over quarter in Q3 from 0.9% quarter over quarter in the second quarter of the year.

Eurozone retail PMI falls back to 51.1 in October from 52.3 in the previous month. A marked drop, but the little watched number still points to ongoing expansion, with Italian, French and German readings also all holding comfortably above the 50 point no change mark.

The UK’s BRC retail sales survey unexpectedly went negative in the headline October balance, which came in at -1.0% year over year in the same-store reading. The median forecast had been for a +0.9% year over year outcome following the +1.9% reading in September. The decline was driven by the worst performance of non-food sales since the data series began in January 2011. The BRC also notes that an uptick in food sales was very much driven by inflation. The survey period came before the BoE hike interest rates for the first time in a decade. The weakness in the report was portended by the October CBI distributive sale report, and the two reports a flagging that the impact of sub-inflation pay awards is starting to bite on the consumer sector.