German Stocks Hit Fresh Highs Following Robust June IFO

European stock markets move broadly higher, led by a 1.4% rise in the Italian MIB, which rallied after the government announced aid and resolutions for two troubled banks. The German DAX is up and has cleared the 12800 mark again after a record Ifo reading, while the FTSE 100 shrugged off a stronger Pound and is also higher amid assurances for EU citizens and speculation that the government is inching toward a softer Brexit. The rise in European equities followed gains in Asia as a rebound in oil prices is underpinning risk appetite globally, with U.S. stock futures also on the up, pointing to opening gains on Wall Street.

German IFO Unexpected Climbed for June

German June IFO confidence unexpectedly jumped to record high of 115.1 from 114.6 in the previous month. The current conditions indicator rose to 124.1 from 123.3 and the future expectations index to 106.8 from 106.5. Expectations had been for an unchanged reading. The diffusion index showed that manufacturing confidence improved only marginally, while construction confidence fell back slightly, but that this was more than compensated for by the sharp improvement in the wholesale index to 23.6 from 20.3 and a rise in the retail sales index to 16.0 from 11.4.

UK consumer credit data from the BBA showed weakening in May data, with consumer lending ebbing to a growth rate of 5.1% year over year, the slowest rate since October 2015. Mortgage approvals dipped to 40.3k, the lowest since last September, from 40.7k. Higher inflation, along with political uncertainties, are blamed for the tail-off in consumers’ demand for credit. The data precedes the June 8 election, but polls during May were showing the dramatic fall in support for the government. With UK Q1 GDP having slowed to just 0.2% quarter over quarter growth, versus 0.5% growth in the Eurozone, and 0.7% growth in the U.S., today’s BBA data is a concern with much of the UK’s growth in recent years having been driven by the consumer sector.

The Conservatives in the UK have reached an agreement with the Democratic Unionists which will see them support Theresa May’s minority government. The deal, which comes two weeks after the election resulted in a hung Parliament, will see the 10 DUP MPs back the Tories in key Commons votes.  The payoff will be an extra 1 billion for Northern Ireland over the next two years. DUP leader Arlene Foster said the “wide-ranging” agreement was “good for Northern Ireland and for the UK”.