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David Becker
BoE

European stock markets moving sideways, as the FTSE underperforms. The global stock market rally started to run out of steam in Asia and investors remain cautious during the European session, with the DAX moving sideways and the FTSE 100 underperforming. U.S. stock futures are also down. The Nikkei still closed with a 0.45% gain, but the ASX was down -0.04% at the close, after swinging between gains and losses earlier in the session. The Hang Seng underperformed amid profit taking and it seems investors need a fresh catalyst, before taking indices even higher. In Europe, markets started lower, but at least some Eurozone markets managed to claw back early losses as subdued July production numbers underpinned the ECB’s cautious stance on QE reductions. The FTSE 100 underperformed but managed to come back from early lows, amid still sluggish wage data, which offset the unexpected dip in the jobless rate and put pressure on Sterling.

WTI crude oil prices are up by 0.8% at $48.66. Prices are underpinning by weekly API data, which showed a 6.2-million-barrel increase in U.S. inventories in the week ending September 8, well up on the median forecast for a 3.2 million rise. The IEA also said in its monthly report, that “demand growth continues to be stronger than expected, particularly in Europe and the U.S.” as it lifted its 2017 global demand growth estimate to 1.6 million barrels per day from 1.5 million n barrels per day previously forecast.

Eurozone industrial production rose 0.1% month over month in July, in line with the consensus forecast. The modest uptick over the month lifted the annual rate to a strong 3.2% year over year from 2.8% year over year in the previous month. Manufacturing PMIs were relatively weak in July, but improved again in August and holiday timings may have contributed to the weakness in July, although the annual rate at 3.2% year over year already confirms that the recovery continues to strengthen in Q3.

UK Unemployment Dipped in July

The UK unemployment rate unexpectedly dipped to 4.3% in July, a new 42-year low, after 4.4% in June. However, the good news was more than offset by soggy earnings figures, with the average household income coming in at a nominal growth rate of 2.1% year over year in the three months to July, unchanged from the prior month’s figure but below the median forecast for a tick higher to 2.3% year over year. The wages data show that low unemployment levels are not translating into higher incomes. With yesterday’s inflation data showing headline CPI running at 2.9% year over year, aggregate wages in the UK remain firmly in negative growth. There are many theories about why wages at lagging, including the impact of the gig economy, “competition” from automation, and weakening of labor unions. Either way, the data suggest that the key consumer sector will remain relatively soft, and with it the UK economy in relative stagnation.

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