European Shares Rebounded from their Lows Following Robust German Orders Data

European equity markets recover some of their early losses. European stock markets started lower after a weak session in Asia, where the Nikkei closed with a loss of nearly 2% as technology, mining, consumer and industrial sectors came under pressure and a stronger Yen added to the sell off. The ASX outperformed with a -0.44% loss as the AUD weakened on disappointing GDP numbers and while risk aversion continued to hang over European markets, FX developments played a role here as well with the FTSE 100 outperforming and paring early lows, as the pound dropped on Brexit angst. The DAX meanwhile is up from earlier lows, but still down on the day, despite strong manufacturing orders at the start of the session. Hawkish comments from ECB’s Mersch didn’t help, but with the EUR down against the dollar at least forex developments didn’t add to pressure as technology shares tumble again and investors try to lock in yearly gains.

German manufacturing orders unexpectedly rose 0.5% month over month in October

German manufacturing orders unexpectedly rose 0.5% month over month in October. Expectations had been for a correction from the strong September number, but while the last figure was revised up to 1.2% month over month from 1.0% month over month, the October number showed a further improvement of 0.5% month over month. This confirms firm survey data and expectations for another strong GDP growth rate in Q4. The German, but also the overall Eurozone industrial sector continues to fire on all cylinders with job creation accelerating, but price pressures also emerging now. Against that background Draghi could tweak the forward guidance next week somewhat to clarify that in the central scenario net asset purchases will end in September next year, even if the door to another follow on program remains theoretically open.

Australia GDP expanded 0.6% in Q3 quarter over quarter mildly missing expectations but after an upwardly revised 0.9% rise in Q2. GDP climbed 2.8% year over year in Q3 after a revised 1.9% growth rate in Q2. The miss relative to expectations was driven by a sharp slowing in the pace of household consumption to 0.1% in Q3 from 0.8% in Q2, leaving the slowest rate of spending since Q4 2008. But business remain upbeat, with a 1.8% gain in total business investment that featured a 18.4% surge in non-residential investment after an 8.8% Q2 drop. The AUD/USD fell just ahead of the report, as the undershoot of total GDP relative to projections combined with the sluggish household consumption growth pace squashed the mild jolt of rate hike optimism seen following Tuesday’s modestly less dovish outing from the RBA.