Equity benchmark indices on both sides of the Atlantic drifted lower today, pulling back from recent multi-year highs as investors remained on the lookout for additional catalysts for further substantial moves on the upside. London’s blue chip index, France’s CAC and Germany’s DAX all started today’s trading session in positive territory, posting firm gains early on after better than expected German retail sales boosted investor demand. Market participants polled by Bloomberg had expected a modest 0.4% m/m increase in retail sales throughout January but were further encouraged into risk assets after retail sales managed to grow by 2.% m/m. However, these early gains were quickly dissolved as US markets opened on the back foot, with early losses on Wall Street acting as a drag on European stocks. At the time of writing both the S&P 500 and DJIA were trading between 0.4-0.5% lower.
The Canadian economy grew faster than expected during the fourth quarter of last year, with GDP growing at an annualised 2.4% against expectations of 2.0% in Q4 according to a Bloomberg poll. Third quarter growth was also revised upwards from 2.8% to 3.2% on an annualised basis, sending the loonie 0.7% higher against the USD as it traded towards 1.2440 as investors speculate that the better than expected data will abate policymakers for now and hold off any further interest rate cut.
The outlook in the eurozone remains fragile and after last week’s heady gains we could see further short term selling on fresh negotiations between Greece and its lenders as investors take profits off the table. Talks for a third bailout package worth as much as €50bn were being discussed as eurozone finance ministers reaffirmed their pledge that Greece would stay in the euro. After breaching the tight trading range which had dominated much of February’s activity, the euro seems to have settled into a new lower range, trading between 1.1150-1.1210 throughout the day as it faces relatively firm resistance towards the end of the session around 1.1200 against the dollar.