The FTSE Outperforms and Sterling Slumps Following May’s Comments


European stock markets are mostly down, with Eurozone markets underperforming and broadly heading south, while the FTSE 100 managed to outperform and post slight gains. Sterling is under pressure as comments from the UK’s May about Brexit has roiled the currency markets. The FTSE 100 seemed to shrug off suggestions from Prime Minister May that she would risk single market access to regain control over immigration and the U.K.’s borders.

U.S. stock futures are slightly down, after Friday’s push higher on Wall Street that saw the Dow Jones testing the 20K mark once again. Japan was closed for a holiday, but other Asian markets managed to move higher, with the ASX 200 closing with a 0.90% gain. The resulting weakness in Sterling may have helped to underpin the FTSE 100 that is heavy with large multinationals. In the Eurozone, peripheral markets are underperforming but the DAX is also down -0.46% on the day, against a 0.17% gain in the FTSE 100. Lufthansa in particular came under pressure after some negative notes on the airline, which countered demand for Volkswagen shares after better than expected sales numbers for last year. Strong German orders numbers and exports failed to give the DAX a lasting lift.

Eurozone Unemployment was Steady at 7-year Lows

Eurozone unemployment held steady at 9.8%, a 7-year low that highlights that the improvement in economic activity also has reached the labor market. Disparities across countries remain very high with the German rate of just 4.1% contrasting with 19.2% in Spain, although even their jobless rates are slowly coming down. Greece, which hasn’t released data for October and November yet, continues to top the league with rates clearly above 20%. Youth unemployment also remains a major concern, with the overall rate of those under 25 without a job actually rising in November to 21.2% from 20.9% in October. This is still below the 21.8% seen a year ago, but the renewed uptick clearly is a concern also for social stability.

Statement from UK Prime Minister May this past week reflecting her view that the UK would exit the EU’s market and pursue deals have not been taken well by the capital markets.  Investors are concerned of a time lag which will create a disruption in trade as the terms of the breakup are unknown.

German November industrial production rose 0.5% month over month, a tad less than expected, but with October revised higher and the numbers not really a surprise, after the up and down of orders numbers in the October/November period, which made it difficult to pinpoint production as much depended on when orders would be realized. The annual rate came in higher than expected and rose to 2.1% year over year from 1.6% year over year and while the three-month average trend rate fell back in November, it remains on a robust path and consistent with a pickup in overall growth in the fourth quarter, with orders data and confidence indicators indicating that the recovery remains intact.

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