Strong Data Caps European Shares Despite Rally in U.S.

European stock markets mostly headed south, with strong data, rekindling tapering concerns, rather than underpinning investor confidence. The EUR/USD move higher for a 3^rd consecutive trading session, despite yesterday’s ECB source story which tried to defuse the importance of Draghi’s comments on policy changes. Today’s solid numbers acted as a reminder that the ECB is still heading for tapering. It appeared that the story helped Wall Street to move higher yesterday and underpinned the rise in Asian markets, it didn’t prevent the DAX from declining today so far, with the stronger EUR also reducing the appeal for foreign investors. The Fed said that all the banks it tested passed their stress test, which allowed many U.S. banks to increase their buyback programs and increase their dividends, giving a boost to the major indexes.

EMU ESI Economic Confidence Soars to 10-year Highs

EMU ESI economic confidence at highest level in nearly a decade. The Economic Sentiment Indicator rose to 111.1 in June from 109.2 in the previous month and is now at the highest level since July 2007. Expectations had been for a modest rise in the headline rate, but robust improvements in manufacturing, services and consumer sentiment saw the ESI jumping much more than anticipated. More backing then for the hawks at the ECB, and even Draghi seems to suggest now that with the recovery on track, policy changes may become necessary.

UK consumer lending rose more than expected in May data. Consumer credit lifted GBP 1.7 billion, up from GBP 1.5 billion in April, while mortgage approvals rose to 65.2k from 65.0 k which was upwardly revised from 64.5k, about the median forecast for 64.0k. The BoE has been mooting the risks of rising consumer indebtedness, which this data seems to underscore the central bank’s semi-annual financial stability report this week advised banks to up their counter-cyclical measures, while Governor Carney, during a press conference, advised consumers to do their own individual contingency planning.

Japanese retail sales were weaker than expected in May climbing 2% year over year according to the Ministry of the Economy. The decline came because of slower sales of durable goods and clothes. Expectations were for an increase of 2.6%.