Stocks Continue to Rally as Crude Hits 32-month Highs

Equities continue to rise in Europe, after a strong close in Asia. The FTSE 100 clocked a new record high of 7733.39 before falling back slightly. The DAX moved above 13400 in early trade, but pared most of its gains and is the underperformer as peripherals outperform. The move higher in Europe followed a solid session in Asia, where the Nikkei closed with a gain of 0.57%, despite the BoJ’s announcement of a reduction in the purchase of some long bonds that spooked forex markets. Hang Seng and CSI 300 were up 0.36% and 0.70% respectively at the close. U.S. stock futures are also moving higher and pointing to a higher open and for now the party on equity markets continues amid confidence in the global recovery. Sentix investor confidence for January, released yesterday showed buoyant mood globally, but the institute also warned of a rising risk of overheating.

WTI futures hit a 32-month high at 62.27 earlier, since settling around the 62.0 mark. The bullish narrative remains unchanging, including the record-high level of compliance that’s underpinning the OPEC-led supply curtailment accord among major oil producing nations, and drawdown in U.S. and global crude inventories. Regarding the latter, the EIA’s weekly report on U.S. inventories, due for release tomorrow, has a median forecast for a 4.1 million barrel decline, according to Reuters. These talking points are so far continuing to overpower expectations for U.S. shale production to ramp higher.

Eurozone unemployment drops to lowest level since early 2009

The jobless rate declined to 8.7% in November, from 8.8% in the previous month and in line with expectations. The decline to the lowest level since early 2009 reflects strong overall growth and ongoing optimism especially in the manufacturing sector that demand will continue to boost orders. Capacity constraints are prompting companies to take on more staff. The rise in temporary contracts since the crisis, however, is one factor keeping wage growth down so far and high levels of youth unemployment are also an ongoing challenge. Overall youth unemployment has declined even at a faster pace than the overall number, but at 18.2% across the Eurozone remains very high.

German trade surplus widens as exports jump. Germany posted a trade surplus of EUR 22.4 billion in November, up from 19.9 billion in the previous month, as exports rose 4.1% month over month, outpacing the 2.3% month over month rise in imports. The three months trend improved further indicating that net exports underpinned overall growth in the last quarter of 2017, although accumulated data for the first 11 months of 2017 show that surpluses in both current account and trade actually declined slightly compared to the corresponding period 2016, highlighting that for once this was not an export led German recovery, but rather than improving global growth is also benefiting German exports, while the strong EUR is helping to keep the import bill down.