Advertisement
Advertisement

European Shares Drift Lower as Neutral ECB Stance is Confirmed

By:
David Becker
Updated: Jun 22, 2017, 11:55 UTC

European stock markets continue to head south, although losses look more muted after equities started to stabilize with oil prices during the Asian

ECB

European stock markets continue to head south, although losses look more muted after equities started to stabilize with oil prices during the Asian session. The ASX outperformed as foreign investors came to the rescue and China’s CSI also managed slight gains, helped by the planned inclusion of 222 mainland equities in the MSSCI index. The Nikkei underperformed and closed with a -0.14% loss as a stronger Yen weighed on exporters. In Europe, the DAX is down along with the FTSE, with the latter underperforming despite a stronger than expected CBI industrial trends survey. Italian and Spanish markets are the main underperformer though, as the ECB’s monthly report confirmed the gradual shift towards a more neutral stance on rates, although officials are clearly still reluctant to pencil in tightening measures. The Reserve Bank of New Zealand held the policy rate unchanged, as expected.

U.K. CBI Survey Was Stronger Than Expected

U.K. CBI survey more upbeat than anticipated, with the total orders reading jumping to a 30-year high of 16 compared to expectations of 7 from 9 in the previous month. The export gauge rose to 16 in June, which was a 22 year high. The good orders number offer a positive outlook as a measure of output growth declined, but while the weak Pound is underpinning export and overall orders, the CBI report also showed continued pressure on prices from a weaker currency, with expectations for output prices elevated this month, even if they remain below the peak seen back in February.

French production outlook surged higher. The latest French business confidence indicator was mixed, with manufacturing sentiment unexpectedly falling back to 108 from 109 in the previous month. The production outlook indicator meanwhile jumped higher to 17 from 7, suggesting that Macron’s sweeping victory in the legislative election helped to underpin confidence. Own company production outlook fell back slightly over the month in June, but held at high levels.

The ECB’s Praet hints at rate hikes on the horizon. The central bank’s chief economist acknowledged that “Germans complain before interest rates are so low”, but added that the discussion on that have been amicable in public and at the ECB governing council. He stressed that “there is a broad recovery that is likely to continue”, with Germany already “a bit further than others”. Prices may still be surprisingly low, but according to Praet “that will change sooner or later. and that will help to bring about a change in monetary policy.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement