Portfolio

Europe open: Stocks track gains in US despite drag from political uncertainty

By Alexander Bueso

Date: Wednesday 14 Feb 2018

Europe open: Stocks track gains in US despite drag from political uncertainty

(ShareCast News) - Stocks are advancing across the Continent, drawing a degree of comfort from slight overnight gains on Wall Street after the new chief of the Federal Reserve said policymakers are keeping an eye on financial stability risks and ahead of a key report on consumer prices on the other side of the Pond later in the day.
Acting as a backdrop, politics were the name of the game after German SPD leader Martin Schulz stepped down as party head on Tuesday evening.

On a related note, economists at Barclays said domestic demand in the euro area's largest economy could be expected to remain weak until that political uncertainty was removed.

Their comments came on the heels of the latest GDP print out of Germany earlier revealing stagnant household consumption which acted as a drag on growth in the fourth quarter of 2017.

"Despite the tailwind from the Global economy, we expect domestic demand to remain weak until the political uncertainty is resolved. Whether or not this resolution occurs in Q1 2018 heavily depends on the outcome of the SPD party member vote on the 4 March," they said.

Against that backdrop, as of 1000 GMT the benchmark Stoxx 600 was 0.75% or 2.74 points ahead to 373.32, alongside a rise of 0.78% or almost 100 points on the German Dax to 12,293.16.

Italy's FTSE Mibtel was the laggard, rising 0.18% or 39.17 points to 22,072.19.

Overnight, and in prepared remarks for his swearing-in ceremony, US Federal Reserve chairman Jerome Powell said: "we are in the process of gradually normalising both interest rate policy and our balance sheet with a view to extending the recovery," adding that "we will remain alert to any developing risks to financial stability."

Trade tensions were also in the news on Wednesday morning, with German business lobby BDI reportedly warning the US risked a dangerous spiral if it moved on the White House's suggestions of fresh taxes on countries that imposed tariffs on American goods.

Separately, Bundesanzeiger reported on US hedge fund Bridgewater's decision to enter into short positions on several of the country's blue-chip names, including Deutsche Bank, Allianz and BASF.

Meanwhile, in economic news, Germany's Ministry of Finance reported that the rate of growth in the country's gross domestic product slowed from a 0.7% pace quarter-on-quarter for the three months to September to 0.6% for the fourth quarter of 2017 (Barclays: 0.7%). Government statisticians also revised lower their estimate for third quarter GDP growth from 0.8% to 0.7%.

On a more positive note, according to Eurostat, Eurozone industrial production was ahead by 5.2% year-on-year in December (consensus: 4.2%).

Back in the corporate patch, industrial conglomerate Thyssen Krupp posted a 52% jump in first quarter 2018 profitability.

Elsewhere, French lender Credit Agricole posted a 33% rise in quarterly profits on the back of the solid performance put in by investment banking unit.





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