Stock Rise as Oil Prices Climb Following Saudi Announcement on Export Cuts

European stock markets are moving broadly higher, with the CAC leading the charge up more than 1%, and the FTSE and DAX trailing. The rebound after three weak days showed banks leading the way, after strong Ifo readings, which lifted core yields. Automakers remain a concern and continue to weigh on the DAX amid speculation of collusion over emissions-cheating technology. The stronger EUR is also keeping the DAX back, although not everyone sees it as an impediment for German stocks, or indeed the local recovery and it doesn’t seem to have dented peripheral markets.

WTI crude futures are up 1.3%, near the 47 handle. At the meeting of OPEC and non-OPEC producers in St. Petersburg on Monday, Saudi Arabia announced its intention to take further action to bolster oil prices. Saudi oil minister Khaled al-Falih declared Saudi oil exports would be limited to 6.6 million barrels per day, a decline of almost a million barrels per day from the country’s export level last year. The oil minister reported that global inventories had fallen by 90 million barrels, crediting the OPEC production cuts. Yet he also said that stocks remained at historically-high levels and additional action by producers would be needed for levels to recede. By focusing on export, the Saudi’s are targeting inventories in the United States, which will show up in the EIA reports in the coming weeks.

German IFO Unexpectedly Rose in July

German July Ifo index unexpectedly jumped to 116.0 from 115.2. Expectations had been for a slight correction in the headline reading, especially after Monday’s disappointing PMI readings, but the Ifo reading hit an all-time high, sending yields higher. Still, the breakdown showed that the overall improvement was entirely due to a sharp rise in the current conditions indicator, while the more forward-looking expectations index stagnated. So, the message is not unlike that of the PMIs, which showed ongoing robust growth, but a slowdown in the pace of expansion.

French manufacturing confidence remained steady at 109 in July, with June data revised up to 109 from 108 reported initially. Overall business confidence improved to 108 from 107, with the latter revised up from 106. The reading for the own company production outlook dipped, however, to 10 from 13, so like the PMI readings yesterday some mixed messages from confidence indicators, although all in all data still points to an ongoing recovery and a robust start to the third quarter of the year.