European Stocks Consolidate at Elevated Levels Despite Rally in Oil

European stock markets are as the FTSE 100 and DAX are struggling at high levels, with the former held back by a stronger Pound and the latter by a reversal of safe haven flows as France and peripherals outperform. Commodity producers followed declines in copper prices, as a stronger dollar hurt base metals.  In Asia, the Nikkei was -0.04% down at the close, while the Hang Seng and the CSI 300 underperformed. Yesterday’s FOMC minutes showed no sign of urgency for a March hike, even if many officials saw the chance of a hike fairly soon.

WTI crude prices are up 1.4% at $54.39, following an unexpected draw in crude oil inventories reported by the American Petroleum Institute after the bell on Wednesday. This was released one day late due to the observance of the Presidents Day Holiday in the U.S.  The market has so far today remained shy of yesterday’s peak at $54.60 and Tuesday’s six-week peak at $54.68. API data showed a 884k barrel drop in U.S. crude inventories in the latest reporting week versus a median forecast for a 3.5 million barrel increase. Another bullish cue was new that ExxonMobil reported that its reserves declined by nearly 20% last year.

German data was mixed. German GfK consumer confidence dipped amid economic concerns. The March projection for GfK consumer confidence fall back to 10.0 from 10.2 in February. The full breakdown for February, when the index rose to 10.2 from 9.9, showed a sharp decline in business cycle expectations, which fell back to 9.7 from 21.6, which is likely to reflect growing tensions on the global political front and the apparent transatlantic rift. Income expectations declined more than 10 points and while the willingness to buy was less impacted, it also came off, as did the willingness to safe, however.

German Growth Remains Robust

German growth picked up as construction booms, net exports drag. German Q4 GDP was confirmed at 0.4% quarter over quarter, as expected and the breakdown, which was released for the first time, confirmed that growth was driven by domestic demand. Construction investment jumped 1.6% quarter over quarter, amid the ongoing housing boom and also thanks to the ECB, which is keeping financing costs down. Government consumption picked up as the election starts to come into focus and the 0.8% quarter over quarter rise in government consumption far outstripped the 0.3% quarter over quarter rise in private consumption.

Machinery investment continues to disappoint and contracted for a third quarter, although the pace of contraction slowed to just -0.1% and with capacity utilization at high levels, the chances are that we will finally see an improvement this year. Exports rose an impressive 1.8% quarter over quarter, but this was far outstripped by a 3.1% quarter over quarter rise in imports, which meant net exports detracted a whopping -0.4% points from the quarterly growth rate after already shaving off -0.3% points in the previous quarter.