Oil and Stocks Rebounds as Risk Returns to the Markets

European stock markets bounce back as risk appetite stabilizes and the focus moves away from North Korea to central bank outlooks and data. In Asia Hang Seng, CSI 300 and ASX 200 held steady as the RBA left rates unchanged, while Japan and South Korea remained under pressure. A stronger Yen continued to weigh on exporters, while a weaker than expected services PMI added to the pressure. In the Eurozone, meanwhile, the downward revisions to an already weak August Services PMI added to signs that the ECB will remain firmly on hold this week and take a very cautious stance as it prepares to take the foot off the accelerator. The DAX is leading the way with a 0.50% gain that left the index slightly above the 12150 mark. The FTSE 100 underperforms and is nearly unchanged on the session. U.S. stock futures are down on the day, as markets return from the Labor Day holiday. Oil prices are higher, as risk appetite stabilizes.

Oil prices are up over 1% as reopening oil refining facilities in storm-stricken locations in the U.S. generate demand for crude. WTI is presently showing a gain of 1.3%, at near 48. The return of refinery activity has concomitantly caused gasoline prices to fall back to pre-hurricane levels.

UK PMI Services Disappointed in August

The UK August services PMI missed expectations, falling to an 11-month low of 53.2 in the headline reading after 53.8 in July. The median forecast had been for a more modest dip to 53.5. Survey respondents noted that subdued client demand and heightened uncertainty about the domestic economic outlook had weighed on business activity during August. New orders rose at the second slowest pace since September last year, and some respondents in the sector reported delayed spending decisions among clients. Despite this, job creation was at its strongest since early 2016, while input price inflation rose by the quickest pace in six months, with the blame falling on sterling’s weakness. Business confidence was at a three-month high but remained subdued compared to levels seen prior to last year’s Brexit vote, and once again the uncertainties stemming from the process to leave the EU got a mention as being a confidence-damping factor. The composite PMI worked out at 54.0 in August, fractionally down on the 54.1 reading seen in July, and consistent with Q2 GDP growth of 0.3% quarter over quarter.

Eurozone retail sales dropped -0.3% month over month, broadly in line with expectations and correcting from a rise of 0.6% month over month, which was revised up from 0.5% month over month reported initially. The three months trend rate eased slightly to 0.7% from the 0.8% where it has been since April. The annual rate dropped back to 2.6%, which is still a robust number, with growth in non-food sales outpacing food and tobacco, which dropped over the month in July.