European Stocks Climb as FTSE Hits Fresh All-time High

European stock markets are moving broadly higher, with the FTSE 100 extending its winning streak and reaching new all-time highs, but for once underperforming the DAX slightly and it is the Italian MIB that is leading the way this morning as UBI Banca continued its rally after its offer to buy three rescued banks was formalized. Elsewhere carmakers and health-care shares rebounded. Fiat Chrysler outperformed and managed to recouped some of yesterday’s sharp losses which were triggered by accusations from U.S. authorities that the car maker illegally masked diesel emissions. The FTSE 100 is heading for a sixth straight weekly gain, helped by ongoing Sterling weakness, while the DAX is at levels last seen in 2015. Risk appetite already started to pick up again late yesterday as disappointment over Trump’s press conference started to wane and Asian markets mostly managed to move higher overnight, with Japan outperforming as the Yen declined. U.S. stock futures are also picking up, but oil prices dipped as WTI fallen back below USD 53 per barrel.

Spanish HICP inflation confirmed at 1.4% year over year, up from 0.5% year over year in the previous month and in line with the preliminary number. The breakdown confirmed that like in Germany, the uptick was mainly due to higher oil prices, which lifted transport price inflation as well as housing costs. Food price inflation also picked up and even the core number rose to 1.0% year over year from 0.8% year over year in the previous month. Still, core in particular remains far below the ECB’s definition of price stability, but while Spain already moved to some extend to remove wage indexation, there is still the risk that the uptick, which is mainly due to base effects will feed through to wages, even though unemployment remains very high.

German wholesale price inflation jumped to 2.8% year over year in December from 0.8% year over year in the previous month. Hardly a surprise after the headline HICP rate already moved up sharply but another number confirming that oil price effects are pushing up inflation numbers on a broad front and with German growth exceeding the average over the last 10-years the risk that oil price effects become more entrenched and lead to higher wages and a broader uptick in prices is higher in Germany than elsewhere.

In Asian China revealed a decline in its trade surplus.  The second largest economy reported a nearly 41 billion surplus, which compares to expectations of a surplus of 47.5 billion and is the smallest in April of 2016, and compares to a November figure of 44.6 billion. During 2016 Chinese trade saw its surplus decline by more than 510 billion from 594 billion in 2015. Exports going to the US increase 5.1% and 8.3% to South Korea, but fell 4.7% to the EU.