European Shares Edge Higher as Economic Data Buoys Stocks

European stock markets are cautiously moving higher, with the FTSE 100 outperforming amid fresh sterling weakness. The first uptick in European markets in three days followed a largely positive session in Asia. The Nikkei underperformed and closed with a loss of -0.17%, but elsewhere raw-material producers led markets higher amid fresh optimism about the global recovery following Chinese manufacturing data and as oil prices are eying the USD 50 per barrel mark. Share buybacks helped the Hang Seng to outperform and gain 1.28% today. German automakers meanwhile are facing fresh pressures amid the diesel fallout and the DAX is nearly unchanged following a stronger than expected German retail sales, which boosted growth optimism while an unexpected uptick in Eurozone core inflation saw yields ticking up.

WTI crude futures clocked a two-month high at 50.06, but eased lower into the mid-49’s. Oil prices have rallied by nearly 19% since the June-21 low, with news of the OPEC-led technical meeting next week to discuss supply compliance providing the latest underpinning. This follows news last week of a slowing in U.S. oil rig additions and falling U.S. inventories, while Washington is also considering sanctions on Venezuela’s oil sector following the weekend’s alleged “sham” election there. There is also news of a fire at a major Shell refinery in the Netherlands.

Eurozone Unemployment Dropped in June

Eurozone June unemployment dropped back to 9.1% from a May number that was itself revised down to 9.2% from 9.3% reported initially. The labor market continues to improve, highlighting that companies remain optimistic about the outlook. So far that hasn’t translated into a real pick up in wage growth, which is partly a reflection of structural changes, partly a reflection of still high youth-unemployment and considerable cross-country differences in headline rates.

Eurozone July HICP inflation came in steady at 1.3% year over year, unchanged from June, as expected. The headline rate remains far below the ECB’s upper limit for price stability, but an unexpected uptick in the core rate to 1.2% year over year from 1.1% Year over year spooked markets and sent the Bund lower. Not that the number is likely to prompt immediate action from the central bank, but the uptick in the core rate will serve as a reminder that the ECB is still heading for a reduction in monthly asset purchases next year, even if Draghi remains coy to talk about tapering and a phasing out of QE.