European Stock Continue to Rally Following Strong UK Labor Data

European stock markets surge higher after mixed Asian session. Data releases and easing concerns over the QE challenge at Europe’s top court helped stock markets to move broadly higher, with the DAX up 0.85% and back at levels last seen ahead of the North Korea tensions knocked markets. The Euro Stoxx 50 is up nearly 1% but the FTSE 100 is underperforming slightly after positive labor market data lifted the Pound. U.S. futures are also up, and risk appetite is improving after a mixed session in Asia, where Hang Seng and ASX outperformed and surged higher, while Nikkei and CSI 300 closed with slight losses. Hong Kong stocks were underpinned by financial companies ahead of earnings reports. Oil prices are also slightly up.

WTI crude futures are higher, earlier logging a two-session low at 47.91. Prices remain well off the high seen on Monday at 49.16. The weekly API report showed U.S. crude inventories declined by 9.2 million barrels in the week to August 11, much bigger than the median forecast for a 3.1-million-barrel draw. There are also reports that Libyan crude output to between 130k and 150k barrels per day, down from 280k barrels per day.

Eurozone Q2 GDP Came in As Expected

Eurozone Q2 GDP confirmed at 0.6% quarter over quarter, in line with the preliminary number and up from 0.5% quarter over quarter in Q1. The annual rate was revised up to 2.2% year over year. Robust data with growth broadening across sectors, but also countries and the range between quarterly growth rates among the big 4 getting smaller. Looking ahead survey data suggests activity remains strong and job creation continues while investment is picking up with companies remaining optimistic about the outlook, despite slightly lower PMI readings in July. So far then the recovery remains on track, but geopolitical risks, a strong EUR, and Brexit concerns continue to hang over the Eurozone outlook and keep Draghi and Co reluctant to commit to a full tapering schedule just yet. Long yields and stock markets remain up on the day after the number.

UK unemployment unexpectedly dipped to a rate of 4.4% in the official ILO figure for June, which is a new 44-year low. The median forecast had been for 4.5%, which would have matched the May rate. Average household income also ticked higher, to a 2.1% year over year growth rate in the three months to June in both the bonus-included and ex-bonus readings, up from respective outcomes of 1.9% and 2.0% in May. Pay awards still lag inflation, which was running at 2.6% year over year in both June and July, though signs of improvement are positive, and come amid the multi-decade low in the jobless rate and record employment levels. Wage growth is also a key metric for BoE MPC policymakers.