European Shares Rise Drive by Banking Shares

European stock markets managed to move higher as utilities and banking shares were sought amid a broader move into defensive names. The selloff in technology shares still continued in Asia, but financials already helped the Nikkei to outperform and close higher against ongoing sharp losses in Hang Seng and CSI. Weaker than expected inflation data out of the Eurozone helped the DAX to rise while the FTSE 100 underperformed as hopes of a smooth Brexit continue to push the pound higher. Oil prices advanced and WTI is trading at USD 57.84 as OPEC signaled readiness to extend output cuts. U.S. stock futures are also moving broadly higher as U.S. tax reform plans remain in focus.

Eurozone jobless rate dropped to 8.8% in October from 8.9% in the previous month. Further signs that the labor market is improving and with PMI readings suggesting ongoing job creation as companies run into capacity constraints the improving trend is likely to continue. Youth unemployment also declined, but at 18.6% across the Eurozone remains very high, with large differences across countries that reveal ongoing issues at structural level. More importantly, the ECB’s wider measures of underemployment have not come down to the same extent since the crisis, which explains, why wage growth has remained muted despite the improvement in headline numbers.

Chinese manufacturing factory activity expanded at a quicker pace in November, as the official manufacturing Purchasing Managers’ Index coming in at 51.8 beating expectations that the PMI would come in near 51.4, after hitting 51.6 in October. China’s services sector also saw activity pick up, with its PMI reading accelerating to 54.8 in November from the previous month’s 54.3, official data showed.

Eurozone Inflation Rose Below Estimates

Eurozone November HICP inflation rose to 1.5% year over year from 1.4% year over year in the previous month, less than expected and with core inflation holding at 0.9% year over year, rather than nudging higher to 1.0% year over year, as consensus suggested. National data had been mixed and while the German rate came in a tad higher than anticipated, French and Spanish numbers ahead of today’s Eurozone release came in below estimates, and with the breakdown showing that the uptick in the headline rate was largely due to a rebound in energy price inflation, which jumped to 4.7% year over year in November from 3.0% year over year, the doves at the ECB will see this as a confirmation that underlying inflation pressures remain muted.