Europe
European growth officially disappeared today; the flash estimate of Eurozone GDP figures for the second quarter dropped to 0% after Germany contracted -0.2% and France stagnated with no growth.
Worries over European growth recently started creeping in after Italy went into a double dip recession but while the aggregate number fell it’s not true to say all of Europe is not growing, notably Spain is reported to have grown 0.6% in the same period. Spain has instituted a number of labour market reforms and is trying to balance its budget in stark contrast to France which appears politically deadlocked and has abandoned its 2014 deficit reduction target.
In the last ECB press conference Mario Draghi noted that “It’s pretty clear that the countries that have undertaken a convincing program of structural reforms are performing better, much better, than the countries that have not done so.”
The European recovery has been fragile and disjointed from the offset with its powerhouse Germany mostly the one dragging the rest along with it. It now seems Germany has fallen back under the weight of the rest of Eurozone, as reflected by the drop in exports.
The ZEW and IFO surveys have shown investor and business confidence gradually dropping in Germany since the start of the year and this has now been reflected in economic data with German factory orders and industrial production numbers falling off a cliff and the economy contracting.
While clearly not a good sign for the European economy, the drop in growth could be a good thing for European shares if persistent low growth and inflation lead to Mario Draghi at the ECB to put into action the bank’s “willingness” to deploy additional extraordinary measures including purchases of asset backed securities or even government bonds.
The FTSE 100 was being driven higher by TUI Travel who’s majority owner Tui AG NA (XETRA:TUIGn) posted strong results and who’s CEO reiterated plans for a merger between the two.
US
Sentiment continued to improve today as a Russian invasion of Ukraine looks increasingly unlikely and the weak US retail sales yesterday put a bit of dampener on those expecting a hike in US interest rates sooner than previously thought.
Wal-Mart Stores (NYSE:WMT), the world’s largest retailer met earnings per share estimates while revenues grew more than expected but cut its guidance for the rest of the year. The main trouble stems from US same store sales which were flat on the year, marking the 6th quarter of no growth. The company has blamed rising costs on investment into its online business alongside increased healthcare costs for its employees associated with ‘Obamacare’.
The company will remain massively dominant in US retail but does face increased competition from Amazon.com (NASDAQ:AMZN) and a difficult consumer environment whereby retail sales data in the US has been tepid this year.
FX
The US dollar was mostly weaker today after a drop in the weekly jobless numbers and as a continuation of the move resulting from the poor retail sales number yesterday.
NZD/USD was one of the biggest risers following strong retail sales data in New Zealand that beat expectations.
GBP/USD is now resting on its 200 day moving average. The level may not be enough to halt declines in the currency pair but is a technical indicator widely watched.
Commodities
It's proving a brief bounce for crude oil. Comments from Putin that may "de-escalate" the Ukraine crisis are sending oil prices even lower as global supplies outweigh global demand. Brent crude is now right back at its 13 month lows.
Gold has been treading water above $1,310 possibly awaiting next week’s FOMC minutes.
Having given up $3.16, copper is seeing more declines below $3.10 per lb and heading towards the low formed in June around $3.03.
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