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Europe close: Investors waiting on German SPD vote on grand coalition

By Alexander Bueso

Date: Thursday 07 Dec 2017

Europe close: Investors waiting on German SPD vote on grand coalition

(ShareCast News) - Stocks on the Continent moved higher - tracking gains on Wall Street - even as political risks in Germany and Italy came into sharper focus.
At the close, the benchmark Stoxx 600 had edged higher by 0.02% or 0.09 points to 386.41, alongside a gain of 0.36% or 46.30 points to 13,045.15 for the German Dax while the FTSE Mibtel added 0.68% or 152.23 points to see the day out from 22,459.51.

Thursday's modest gains came as investors wating on the results of the German SPD party conference, with members of the centre-left movement set to vote later in the day on whether or not to proceed with talks to form a 'grand coalition' with Chancellor Merkel's the CDU/CSU.

The SPD's then current leader, Martin Schulz, was also facing a vote from party delegates.

According to analysts at Citi, a large majority in favour of talks with the CDU and a good result for Schulz would "be a strong signal that a grand coalition is the new base case".

Perhaps, yet as Barclays Research pointed out: "according to a Spiegel Online poll, only 27.9% of SPD voters prefer a Grand Coalition, while 61.6% of CDU voters favour one. While it will be delegates representing party members, rather than voters, who will vote on this proposition, their view will likely be influenced by actual voters."

Meanwhile in Italy, on Wednesday two of Prime Minister Matteo Renzi's allies said they would not run in the 2018 elections.

Despite the political uncertainty, in a research note sent to clients on 6 December strategists at Citi struck a confident tone, saying that "synchronised growth means everything is going up in Europe [in 2018]".

Acting as a backdrop, in general financial markets were in a holding pattern ahead of the monthly US non-farm payrolls report that was set for release the next day.

Factory sector activity in Germany hits speed bump

German industrial production shrank by 1.4% month-on-month in October (consensus: 0.9%), according to the country's Ministry of Finance. Acting as a partial offset, September's 1.6% month-on-month drop was marked up to show a smaller decline of 0.9%.

Manufacturing was the weak link in the chain, with factory output for October down by 2.0% on the month.

Elsewhere, France's surplus in its foreign trade in goods improved from -€4.2bn in September to -€3.3bn for October, according to the French central bank.

Meanwhile, ELSTAT reported that the rate of unemployment in Greece dipped from an upwardly revised 20.7% for August to 20.5% in September. The rate of joblessness in the prior month was originally estimated at 20.6%.

In parallel, Eurostat reported that the rate of euro area GDP growth dipped in the third quarter to 0.6% clip quarter-on-quarter, down from 0.7% over the prior three-month stretch.

On the corporate side of things, French broker Natixis said it was studying a long-term tie-up with rival Oddo BHF.

Another French Bureau Veritas was also in the headlines after it confirmed 2017 guidance for slighty positive organic growth and improved cash generation, adding that its 2020 Strategic Plan was "well underway and delivering tangible benefits".


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