Mind The Gap; the mid morning London and European markets update pre New York’s open

Aug 14 • Mind The Gap • 1862 Views • Comments Off on Mind The Gap; the mid morning London and European markets update pre New York’s open

Eurozone out of recession, Germany’s improved GDP, France out of recession, whilst UK unemployment holds steady…celebration

Many of the economists’ predictions, with regards to today’s high impact news events, have become fact. Both French and German GDP numbers have improved and the long awaited, much heralded EZ exit from recession has finally come to fruition, with the EZ growing by 0.3% during the last quarter according to a flash estimate.

So far the reaction on the markets has been muted and moderate, neither the European main markets or the euro, have made any gain on the news suggesting that market analysts had forewarned investors and speculators causing the improved data to be already ‘priced in’. EUR/USD has remained fixed to the daily pivot line, whilst the most popular European markets remained mixed.

 

In Q2 2013 French GDP jumped by +0.5%

As predicted by many of the economists polled, in Q2 2013 GDP (in volume terms) rose by 0.5% after a 0.2% fall in each of the two previous quarters, the largest increase since Q1 2011. The annual growth rate carried over at the mid-year point is +0,1%. Household consumption expenditure accelerated (+0.4% after –0.1%). Total gross fixed capital formation (GFCF) decreased again, but less sharply than in the beginning of the year (–0.5% after –1.0%). Final domestic demand (excluding changes in inventories) contributed to GDP acceleration: +0.3 percentage points in Q2, after –0.1 points in the previous quarter.

 

German GDP up 0.7% in 2nd quarter of 2013

Germany’s GDP number rose in line with expectations. Following a weak start to the year, the German economy is finally gaining momentum. The Federal Statistical Office (Destatis) reports that, compared with the previous quarter, the gross domestic product (GDP) increased by 0.7% in the second quarter of 2013 after adjustment for price and seasonal and calendar variations. According to the most recent calculations, the German economy had stagnated in the first quarter of 2013, following a 0.5% decrease of the GDP in the last quarter of 2012. In the second quarter of 2013, positive contributions were made mainly by domestic demand.

 

UK Labour Market Statistics, August 2013.

The employment rate for those aged from 16 to 64 was 71.5%, up 0.1 percentage points from January to March 2013 and up 0.4 from a year earlier. There were 29.78 million people in employment aged 16 and over, up 69,000 from January to March 2013 and up 301,000 from a year earlier. The unemployment rate was 7.8% of the economically active population, unchanged from January to March 2013 but down 0.2 percentage points from a year earlier. There were 2.51 million unemployed people, down 4,000 from January to March 2013 and down 49,000 from a year earlier.

 

Minutes of the Bank of England Monetary Policy Committee Meeting.

The UK BoE monetary policy committee voted 9-0 to keep their asset purchase scheme at £375 billion, but there was one dissenter making the vote on tying interest rates to unemployment 9-1.

The Governor had invited the Committee to vote on the proposition that: The Committee intends not to raise Bank Rate from its current level of 0.5% at least until the Labour Force Survey (LFS) headline measure of the unemployment rate has fallen to a threshold of 7%, subject to the conditions below. The MPC stands ready to undertake further asset purchases while the LFS unemployment rate remains above 7% if it judges that additional monetary stimulus is warranted. But until the unemployment threshold is reached, the MPC intends not to reduce the stock of asset purchase.

 

Eurozone exits its record long recession

The 17 countries of the eurozone grew by 0.3% in the second quarter, emerging from an 18 month double-dip recession and beating estimates of a 0.2% increase.

 

Market snapshot at 10:00 am UK time

In the overnight/early morning session the Nikkei closed up 1.32%, the Hang Seng closed up 1.21%, whilst the CSI closed down 0.42%. The ASX 200 closed down 0.01%. European markets are mixed; the UK FTSE is down 0.39%, STOXX is down 0.12%, the CAC is up marginally by 0.03%, DAX down 0.08%, the IBEX down 0.48% and the MIB down 0.35%.

Looking forward to the USA markets opening the DJIA equity index future is down 0.23%, the SPX 500 down 0.29% and the NASDAQ down 0.10%.

 

Commodities

ICE WTI oil is currently down 0.41% at $206.39, NYMEX natural is up 0.64% at $3.31 per therm, COMEX gold is up 0.23% at $1323.4 per ounce, whilst silver on COMEX is up 0.69% at $21.49 per ounce.

 

FX focus

The Swissie dropped 0.3 percent to 1.24153 per euro early in the London session after depreciating to 1.24285, the weakest level witnessed since July 11th. Switzerland’s currency dropped 0.3 percent to 93.55 centimes per dollar. The euro was little changed $1.3267 and rose 0.1 percent to 130.42 yen. The yen was little changed at 98.31 per dollar. The Swiss franc fell to the weakest in a month versus the euro before the report (now published) showing that the 17-nation region pulled out of recession last quarter, damping demand for safer assets.

The New Zealand dollar strengthened for the first time in three days versus the U.S. currency after Statistics New Zealand revealed data showing that retail sales increased by a considerable 1.7 percent in the second quarter, the biggest gain since 2006. The kiwi gained 0.4 percent to 79.93 U.S. cents, after rising to 80.58 cents on Aug. 12th, matching the highest level since July 29th.

The U.S. Dollar Index advanced 0.1 percent to 1,026.50 after climbing to 1,027.23 yesterday, the highest level reached since Aug 6th.

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