Europe
Greek shares were an outlier on Tuesday as European markets traded higher furthered by a big upwards revision in US third quarter GDP growth to 5%. The jump in US GDP driven by consumer spending is another bit of evidence demonstrating the benefit of lower oil prices to the global economy.
By the same token French consumer spending doubled expectations in November with only Italians slow to get back on the horse seeing flat retail sales in the month.
In the second-round of voting the Greek parliament has again failed to select the next Greek president. The Prime Minister’s candidate won 168 votes which is more than the first vote but he seems unlikely to hit the 180 required to win the third round on December 29.
The result of the PM’s man for president not being selected could be anti-austerity party Syriza coming to power at an early general election in February.
The market reaction outside of Greece has been subdued since it’s really all about the third vote. Even if no candidate is selected in the third vote; Syriza has recently stated they have no policy to drop the euro which reduces the potential fallout from their election.
UK stocks managed small gains on Tuesday but were held back somewhat by downward revisions to the past five quarters of economic growth. Third quarter growth remained unchanged from previous estimates but as a result of the revisions to prior quarters the annual rate dropped to 2.6%.
Thorntons (LONDON:THT) shares melted after the confectioner issued an annual profit warning heading into a time of year when chocolate is heavily in demand.
US
With just over a week left until the end of the year, the Dow finally breached 18,000 after a surprisingly big upwards revision to US third quarter growth raised confidence in the US economy’s ability to ride out higher interest rates.
Third quarter US GDP expanded higher by 5% year-on-year well ahead of the 3.9% previously estimated. Lower oil prices and rising employment spurred US consumers to head to the shops as household spending increased by 3.2%.
Durable goods orders didn’t fare so well; declining -0.4% month-on-month against expectations of a 1.1% rise albeit slightly better than the -1.1% fall in the previous month.
Consumer confidence remained at seven-year highs according to the University of Michigan survey thanks to falling unemployment continuing a trend that’s been going for most of 2014.
FX
The US dollar was stronger than most major counterparts today thanks to the much better than expected third quarter GDP final revision. The British pound was one of Tuesday’s biggest underperformers thanks to the lower revision to annual GDP growth.
GBP/USD fell close to 100 pips beneath 1.55 as US growth overtook the UK to become the fastest growing nation in the G7.
EUR/USD was under pressure and fell beneath 1.22 as the US dollar strengthened. It is now just spitting distance from the 2010 lows.
USD/JPY firmed its position above 120 and looks on its way to re-testing the seven-year high just under 122.
Commodities
Natural Gas was down again on Tuesday but not at the rapid pace seen on Monday.
Oil prices jumped back again and in doing so managed to hold above recently-formed multi-year lows ahead of US oil inventory data tomorrow.
Gold saw modest gains on Tuesday after falling heavily with a daily range of over $40 on Monday. The precious metal has declined recently over a lack of safe-haven demand as stock markets continue to rally.
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