London View

Mild gains for European markets & satisfactory UK GDP figures

European stocks added mild gains on Friday following a spate of better than forecast economic data out of Europe, helping to ease nervous markets about the outlook of the euro zone economy. US stock markets were little changed as investors’ awaited fresh data in the form of US consumer confidence which is likely to increase according to economic forecasts by Bloomberg.

An increase in confidence is unlikely to change the Federal Reserve’s thinking regarding interest rate policy which the central bank shows it is in no rush to start adjusting upwards. This week's downward revision to first-quarter US growth and weaker spending figures have confirmed that the markets were unsure if the Fed will tighten policies this year.  This now seems even more unlikely. Still, this has pushed US government bond yields closer to their low for the year with the 10-Year at 2.51%.

Back to Europe, major benchmarks added small gains on the back of some improving economic data. Despite poor GDP figures from France in the first quarter, French consumer spending data for May looked stronger, suggesting a rebound in the economy in the second quarter of this year.

Germany's inflation rate climbed from a four year low this month, allaying worries the euro zone’s powerhouse is feeling the threat of disinflation. Italian manufacturers' confidence rose to its best levels in three years with the indicator hitting 100 in June, rising from the 99.8 readings in the two months before.

In the UK, the third release of GDP figures for the first quarter fell short of market expectations but, were in line with the previous reading of 0.8% which, in all fairness, is a strong number and encouraging that the economy maintained its robustness.  More encouraging is that business investment was 10.6% higher in the first quarter of this year versus the same period last year. For the European Central Bank, some disheartening data in the shape of the European Commission survey recorded a decline in confidence during June.

The EC’s headline Economic Sentiment Indicator-which measures confidence in a number of business sectors and among consumers, fell to 102.0 from 102.6 in May. That was a surprise to markets as consensus was calling for a rise to 103.0, indicating the ECB’s latest stimulus measures didn’t inspire enough confidence in markets.

Elsewhere, oil prices eased a tad following recent strength with NYMEX crude trading at around the $105 mark while  Brent crude on London's ICE Futures exchange was at $113 mark, still elevated, just off its record high of $115. Violence in Iraq has been a big source of concern for oil markets on supply disruption fears but markets are also now of the view that there seems to be greater effort by the Iraqi forces to protect oil pipelines in the south of the country.