Strong Production Data Buoys U.K. Stocks

European stock markets are mostly down with the FTSE 100 outperforming and posting marginal gains after robust production data and amid confidence in the global growth outlook, which already underpinned gains on most Asian markets and lifted U.S. stock futures. the pound is also on the move higher. With the Spanish constitutional crisis hanging over the Eurozone, the DAX is lower and Italian and Spanish markets underperform ahead of the decisive session in Catalonia’s regional parliament and with the threat of tougher ECB regulation on Non-Performing Loans adding pressure. Against that background strong German export growth again wasn’t sufficient to lift the DAX above the 13000. Asian markets closed mostly higher. The Topix climbed to the highest since 2007, Hong Kong stocks also posted a fresh 10 year high underpinned by developers, and the CSI 300 recovered intermittent losses and closed up 0.20%. The ASX meanwhile moved sideways as the local currency strengthened and oil prices moved up from lows.

Oil prices are trading above USD 50 per barrel ahead of inventory data, which is forecast to show a third weekly drop in U.S. crude inventories. Saudi Arabia meanwhile said its state oil company will sell 560,000 barrels a day less than customers are demanding in November. At the same time, September data showed that Iraq and Iran boosted crude exports in September, thus taking advantage of lower shipments from Saudi Arabia.

UK August production data beat forecasts, the industrial output rising 0.2% month over month and 1.6% year over year, unchanged and up from 0.4% growth in the respective month over month and year over year comparisons from the month prior. The median forecasts had been for 0.2% month over month and 0.9% year over year. The narrower manufacturing production gauge showed growth of 0.4% month over month and 2.8% year over year, versus 0.5% month over month and 1.9% year over year growth figures in the month previous. The median forecasts had been for more modest growth of 0.2% month over month. The upward surprise in production was offset by worse than expected trade figures. The overall UK trade deficit blow out to GBP 5.6 billion, much worse than the median forecast for a GBP 2.8 billion deficit.

UK BRC September Retail Sales Beat Expectations

UK BRC September retail sales beat forecasts in rising 1.9% year over year in the headline same-store measure, up from 1.3% year over year growth in the month prior. Higher food and clothes prices drove the gain, along with back-to-school purchases. The survey found that consumers were tending to focus on buying essentials and less on big-ticket items. So, overall, the robust headline disguises a less encouraging picture, with consumer spending power being eroded as wage demands failing to keep up with inflation which is running at 2.9% year over year.