Stronger than Expected Eurozone Industrial Production Fails to Buoy European Equities

European stock markets are mostly down, after a largely positive session in Asia. Japan underperformed as the yen strengthened amid a wider dip in the dollar, amid fresh concerns about Trump’s legislative agenda following the Democrats’ victory in Alabama and this also weighed on European markets, leaving the DAX down along with the Euro Stoxx 50. The FTSE 100 outperformed slightly as weaker than expected unemployment numbers knocked sterling down from highs, the IBEX, which was hit by the government’s sale of a 7% stake in Bankia Tuesday bounced back, while Italy’s MIB underperformed in tandem with BTPs amid reports of a general election in early March next year. In Asia, the Hang Seng outperformed and bounced nearly 1.5% with Air China Ltd rallying but casinos leading the gains on the benchmark index.

Crude oil prices edged higher ahead of the EIA inventory report but following a larger than expected draw reported by the American Petroleum Institute on Tuesday evening. API data showed a 7.4-million-barrel drawdown in U.S. crude inventories, much bigger than the median forecast for a 3.8 million decline. There is also news that UK’s biggest pipeline form North Sea oil and gas fields has been closed for up to four weeks as repairs are made. The pipeline carries 450k barrels per day, and had to be closed after cracks were discovered. This, along with strong demand and the OPEC-led supply curtailment accord, which will continue through to the end of 2018, has fed a strengthening bullish sentiment in crude markets.

Eurozone Employment Rose in Q3

Eurozone employment rose 0.4% quarter over quarter in Q3, bringing the annual rate to 1.7% year over year from 1.6% year over year in Q2. Further signs that the Eurozone recovery has reached the labor market with not only unemployment coming down, but employment growth also strengthening. Wider measures of underemployment have failed to come down to the same extent since the crisis and wage growth so far has failed to pick up in a way that would reflect the improvement in official jobless numbers.

Eurozone October industrial production stronger than expected at 0.2% month over month, bringing the annual rate up to 3.7% year over year from 3.4% year over year in the previous month. National data was mixed in October, with German production underperforming in the September/October period, but the fact that the Eurozone number still picked up highlights that the Eurozone recovery is increasingly broad-based. The three months trend growth rate stayed at a healthy 1.2% and with companies reporting capacity constraints the data will add to the arguments of those at the ECB pushing for Draghi to commit to an end date for QE.