Oil Gains and DAX Leads European Stocks Higher

The German DAX is leading European stocks higher on Wednesday returning from Tuesday’s holiday with a surge of more than 1.5% to new record highs of over 13400. The FTSE 100 underperformed with a modest gain of 0.20%, as a stronger than expected manufacturing PMI reading underpinned further gains in Sterling and likely solidified expectations for a rate hike from the BoE Thursday. European shares followed a positive session in Asia, where Japan led markets higher, as a weaker Yen helped the Nikkei to close up 1.86% on the day. Optimism about earnings reports and U.S. tax plans continue to underpin investor sentiment and U.S. stock futures are also up, while WTI is trading near 55.00 per barrel, after reaching a session high of USD 55.22 per barrel.

The American Petroleum Institute reported on Tuesday evening that U.S. crude supplies dropped by 5.1 million barrels for the week ended Oct. 27, which was a larger drop in stocks than expected. The API data also showed a decline of 7.7 million barrels in gasoline stockpiles, while inventories of distillates lost 3.1 million barrels.

UK October Manufacturing PMI Beat Expectations

The UK October manufacturing PMI beat expectations, rising to a 56.3 headline reading, up from 56.0 in September. The median forecast had been for a 55.8 outcome. The survey highlighted that production and new order volumes continued to rise at a robust pace, with the domestic market strong and new export business rising. While sterling weakness since the Brexit vote last year improved competitiveness in export markets, a recent rebound has eroded some of this benefit, while the report also showed that the rates of inflation in input costs and output charges are accelerating at rates well above historical series averages.

China reported that its official manufacturing Purchasing Managers’ Index for the month of October came in at 51.6 missing expectations. Expectations were for the world’s second-largest economy to post official PMI of 52.0 for October, down from 52.4 in September. Both production and demand fell in October due to week-long public holidays and a slowdown in industries that were cutting excess capacity and pollution, the bureau added in a separate statement. Official services PMI meanwhile fell to 54.3 in October from 55.4 in September, the National Bureau of Statistics reported.

Japanese manufacturing activity in October slowed less than initially thought. The final Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) was 52.8, above the preliminary reading of 52.5 and just below September’s final reading of 52.9. The index remained above the 50 threshold that for the 14th consecutive month. The output component of the PMI index was a final 53.3, above a preliminary a 52.6 and above a final 53.2 in September.