After a sluggish start to the day European equity indices managed to gain significant ground as encouraging economic data out of both the eurozone and the US prompted reluctant investors back into the market. German unemployment data set the tone early on, posting a surprise 15K decline in December against a modest 1K decline predicted by analysts in a Bloomberg survey. German retail sales also came in above expectations, accelerating 1.6% y/y in November from a 0.2% decline y/y the previous month. Eurozone inflation data rounded off the day’s important releases, with the CPI estimate in line with expectations of 0.8% y/y in December, slightly below the previous months figure of 0.9% as it diverged further from the ECB target rate of 2% and hinted at the increasing risk of deflation.
Despite the overhanging eurozone concerns the better than expected data supported the DAX index 0.83% higher as it moved back above 9,500 after slipping from record highs on the first trading day of the year as investors took profits. London’s blue chip index managed to add 0.37% throughout the day as confidence returned. Bullish US sentiment helped buoy US equity indices as they opened higher, with the DJIA and S&P 500 trading 0.7% and 0.6% higher at the time of writing after a smaller than expected trade deficit which decreased to its lowest level since October 2009. Investor attention will now switch to ADP employment data, due out tomorrow, which analysts are expecting will show an increase of 200K in December.