European Stocks are Mixed as U.S. Markets are Close

European stock markets are struggling with dollar weakness. European stock markets are mostly lower, as markets struggle with the currency the rise in pound and euro against the dollar. The US is on holiday, leaving markets a bit quieter today, and while Asian markets still moved mostly higher, the Hang Seng fell back again in the end and closed -0.23% as investors turn cautious with indices at very high levels amid warnings that markets are increasingly overbought. U.S. stock futures meanwhile are underpinned by the weakness in USD and redemptions in the Eurozone today are adding liquidity and helping Italian MIB and Spanish IBEX to outperform.

Eurozone trade surplus widens as exports rise

The Eurozone posted a trade surplus of EUR 22.5 billion in November, up from EUR 19.0 billion in the previous month, with export growth outpacing import growth in November. The unadjusted surplus for the first eleven months of the year amounted to EUR 213.1 billion, down from EUR 237.7 billion in the corresponding period last year, with exports rising 8%, while nominal imports rose 10.0%. The monthly data shows, however, that short-term trends are improving and consistent with a positive contribution of net exports to overall growth in the last quarter of the year.

Brexit-related developments are likely to pick up with talks between the UK and EU on a transition deal are due to start, although negotiations on a future trading relationship are not due to begin until March. A transition period, which would see the UK remaining in the single market and customs union, but without voting rights, for at least two years after actual Brexit on 29th March 2019, is widely considered as being crucial in maintaining the confidence of businesses with long-term planning horizons, such as airlines. The government still hasn’t made it crystal clear what type of Brexit it wants, whether a soft form like the Norwegian or Swiss models or a hard form with a trade new deal, like Canada, although its language ostensibly points to a hard exit.

Both the UK and EU have also been making contingency plans for a scenario where Britain leaves without any deal, which is looking less likely since last month’s show of resolve behind the agreement on divorcing terms. The EU is aiming to have negotiations wrapped up by October, to allow time for ratification ahead of March 2019. Aside from the obvious hurdle of 27 nations ratifying a new deal, the UK parliament will also vote on it. A vote against in the UK’s House of Commons, which some fear would inevitably spark a constitutional crisis that would trigger a new general election or the second referendum on EU membership.