Concerns of U.S. Tax Bill Weigh on Asia And Europe but U.S. Futures are Higher

European stock markets are mixed, with the relatively dovish message from Draghi Thursday helping Eurozone peripheral bond markets but failing to underpin stock market sentiment as investors flog back into higher yielding Eurozone bonds. Disappointing sales reports from H&M added pressure on retailers, which led the decline. Only the FTSE 100 managed slight gains as the pound came under pressure. The weak performance in Europe followed broad losses in Asia overnight, with concerns about the U.S. tax bill underpinning the drying up of demand ahead of the holiday period. U.S. stock futures are moving higher though amid a weaker USD.

WTI futures are up by 0.6%, off the two-day high. The gain builds on a rebound from the six-session low seen yesterday at $56.09. The unexpected outage of the Forties pipeline in the North Sea, following the discovery of cracks on Tuesday, continues to feature in market narratives as a price-supporting factor at play, along with the OPEC-led supply curtailment program. These factors are helping offset the impact of an expected ramp-up in U.S. crude supply.

Eurozone trade surplus narrows as exports drop

The Eurozone posted a trade surplus of EUR 19.0 billion in October, down from EUR 24.5 billion in the previous month, as exports dropped back to EUR 180.6 billion from EUR 185.0 billion, while nominal imports picked up. The unadjusted numbers showed a surplus of EUR 18.9 billion, down from EUR 19.2 billion in October last year, with accumulated data from January to October indicating a surplus of EUR 187.9 billion, down from EUR 213.8 billion in the first 10 months last year. This is nominal data, impacted by developments in energy prices and exchange rate developments, and these are still healthy surpluses and less of a sign that growth is slowing down, but that the recovery is broadly balanced and not reliant on trade, as especially German recoveries tend to be in the past.

ECB’s Vasiliauskas questions need for QE beyond Sep 2018. While Draghi tried his best to give the impression of a united council that is backing the open-ended feature of the QE program and to suggest that the future beyond September next year is open, council member Vasiliauskas took a different tack saying that with the economy reaching potential next year the ECB will have to decide on the future of QE adding that “it is likely that the economy won’t require any additional support”. Clearly whatever the impression Draghi is trying to convey the number of those that expect QE to end in September next year, or at least be quickly phased out after that is on the rise and Draghi seems to be falling not only behind markets but also council members.