Originally published by Rivkin Securities
Friday was a fairly quiet night for data releases meaning there was little news for markets to focus on. The biggest data release was Euro-zone inflation, which rose +0.6% over the past twelve months from a downward revised +0.5% in October. A core measure which excludes volatile items such as food and energy was in line with market forecasts of +0.8%. Prices have stabilised in the EU on the back of extraordinary stimulus from the ECB and the rebasing effect of rising oil prices. The headline inflation figure paints a positive outlook having reached the highest levels since April 2014 which boosted the euro by +0.34% against the dollar.
Meanwhile the core reading has been flat for the past few months and continues to show that the story is one of stabilisation rather than robust demand pushing prices higher. This outlook is certainly improving, but has quite a way to go. This combined stabilisation of the economy along with the easy stance of the ECB’s monetary policy should continue to provide tailwinds for European equities which closed higher on Friday, led by gains in the Euro Stoxx 600 +0.34% and DAX +0.33%.
The first chart below highlights both the Euro Stoxx 600 & DAX30 which are up 18% and 29.75% since their February lows, with the DAX30 having technically entered into bull market in the past few weeks while the Euro Stoxx 600 is within reach. Europe will certainly have its share of volatility in 2017 with key elections in France, Germany & the Netherlands however if 2016 has taught us anything, to reference the British saying “keep calm and carry on”.
In the US equity markets took a break with the S&P500 & Nasdaq100 finishing trading -0.18% & -0.38% lower respectively. The U.S. dollar index was -0.2% weaker despite bond yields relatively unchanged thanks to the stronger euro which contributes the heaviest weighting to the index.
On Friday Chinese policy makers set the tone for 2017 at the annual Central Economic Work Conference. 2017 policies will address industrial overcapacity, destocking housing inventory, lower corporate borrowing costs, steady deleveraging and improving weak links according to the statement. In a boon for commodities authorities will continue with the reduction of inefficient steel, iron and coal production. China will continues with proactive fiscal policies and prudent monetary policies in 2017 as it attempts to find just the right balance between stable growth and addressing asset bubbles. Specifically addressing the rising property prices, policy makers have said they will target speculative investing the Chinese property and increase land supply.
Locally the Australian dollar was -0.69% weaker at 0.7304 while the S&P/ASX 200 swung between losses & gains before closing modestly higher, up +0.31% at 5,560.62. This morning we can expect a fairly flat start to trading with ASX SPI200 futures finishing 4 points lower on Friday.
Data releases:
· German IFO Business Climate, Current Assessment and Expectations Survey (MoM Dec) 8:00pm AEDT
· Euro-zone Construction Output (MoM & YoY Oct) 9:00pm AEDT
· US Markit Composite & Services PMI – Preliminary (MoM Dec) 1:45am AEDT
