European equity markets gave back earlier gains and slid lower on Monday, as investors were prompted to profit take, locking in recent gains following the Santa equity rally last week. DAX and London ended lower by more than 0.15%. It should be noted that trading volume was thin due to the Christmas holiday period.
The euro rallied strongly and traded above 1.38 against the US dollar, gaining almost 0.5% on the day, showing signs of steady but strong economic recovery across the Eurozone. Furthermore, the sterling has also continued its strong rally, trading above 1.65 against the US dollar, nearly reaching a 2 ½ year intraday high against the US dollar.
In London, retailers were again under pressure as Sainsbury, Marks & Spencer, Tesco and Morrisons retreated between 1.1% and 1.5% amid concerns over declining sales during the Christmas holiday period.
In the US, pending home sales rose modestly by 0.2% in November, missing analysts’ expectations of a 1% rise. The Dallas Fed manufacturing business index rose to 3.1 in December.
Tomorrow, the main focus will switch to the release of the Chicago PMI data, consumer confidence figures as well as Dallas Fed services index that could provide further signs about the US economic prospects.
In the meantime, the weaker US dollar has been fairly supportive for equity and commodity markets as the US dollar index has been currently trading below the 80.0 area, falling more than 0.45% on the day.