Risk appetite improves on stronger economic data

Thursday, December 18, 2014

Major European equity benchmark indices extended gains for a third straight session today, as investors reacted positively to comments made by Fed chair Janet Yellen at yesterday’s press conference, which concluded the two day FOMC meeting. London’s blue chip index, France’s CAC and Germany’s DAX were all on track to end the day higher as risk appetite and encouraging economic data boosted prospects for the region. Kicking off the session was Germany’s Ifo business climate index which improved slightly month-on-month, rising from 104.7 previously to 105.5 in December. The Ifo expectations index encouraged confidence in the region further, coming in at 101.1 for December, better than the 100.5 reading expected by market participants polled by Bloomberg and markedly better than the 99.8 reading the previous month.

Markets gained further buoyancy from better than expected UK retail sales in November which grew at their fastest pace in more than ten years. Market participants polled by Bloomberg were expecting a modest 0.3% m/m rise in retail sales excluding autos, but with retailers offering significant discounts in the run up to Christmas investors were left pleasantly surprised when retail sales grew 1.7% m/m in November, offering an encouraging outlook for the last quarter of the year.

The optimistic tones echoed across the Atlantic after initial weekly jobless claims came in below expectations with 289K new claims during the week ending Dec 13th against expectations of a 295K increase. Bloomberg’s consumer comfort index also reinforced the bullish tones, rising to a seven year high as it hit 41.7. Indications of a firmer labour market and increasing confidence among investors saw both the S&P 500 and DJIA trade between 1.3% and 1.65 higher immediately after the open as both indices are poised to recover significant chunks of the sell-off that has persisted over the past two weeks. 

UK retail sales in November post surprise increase to 1.7% m/m

UKRVAMOM Index UK Retail Sales 2014 12 18 14 55 29

Bloomberg's consumer comfort reading rises to a seven year high

COMFCOMF Index Bloomberg US Wee 2014 12 18 15 10 59

Topics: US Fed, Equities
More from: Kash Kamal