European Stocks Bounce as Bundesbank Sees Slower Growth

European stock markets are higher on the day amid a global improvement in risk appetite. Asian markets outside of Japan, which was on holiday, posted broad gains overnight, led by a 1.27% jump in the Hang Seng. Chinese stocks traded in Hong Kong rallied as China relaxed rules on index futures trading. The improvement in stock markets continued during the early European and the DAX was up along with the FTSE 100. Eurozone peripherals outperformed in tandem with peripheral bond markets after S&P lifted Portugal’s rating to investment grade. U.S. stock futures are also supported and Wall Street is heading for further gains as the focus shifts towards this week’s Fed and BoJ announcements.

WTI futures hit a fresh four-month high, this time at $50.84, before settling back around $50.35, which is fractionally net lower on the day. The gain follows Friday’s latest rig-count data out the U.S. showing an unexpected seven-rig production halt. This follows recently upgraded global demand forecasts by OPEC and the IEA, and a pickup in demand as hurricane-afflicted refinery plants come back online.

Eurozone August Inflation Was Higher in August

Eurozone August HICP inflation was confirmed at 1.5% year over year, up from 1.3% year over year in the previous month and in line with the preliminary number. Core inflation was confirmed at 1.2% year over year, unchanged from July. Energy price inflation accelerated to 4.0% year over year from 2.2% year over year and was a key driver behind the uptick in the headline rate in August, which backs the arguments of the doves at the ECB that further monetary stimulus remains necessary, as the ECB heads for yet another QE extension.

Bundesbank sees a slowdown in growth in the third quarter. According to the Bundesbank’s latest monthly report, German growth is likely to be slightly lower in the third quarter, compared to the strong dynamic seen in the first half of the year. At the same time, the Bundesbank stressed that the strong currency hardly left its mark on producer price inflation. The Bundesbank President Weidmann continues to call for an end to the central bank’s asset purchase program.

Portuguese bonds rally after S&P raises the rating to investment grade. S&P lifted Portugal’s rating to BBB- from BB+, ending the junk rating that had been in place since 2012. The Portuguese 10-year yield is down -25.4 basis points at 2.50% the lowest in more than 2 years.