Stocks - European Markets Open Higher Ahead of Inflation Data

European Stock Markets

European markets opened higher on Wednesday, as investors awaited the release of euro zone inflation data due later in the day, amid fresh corporate earnings reports. 

The EURO STOXX 50 rose 0.21%, France’s CAC 40 gained 0.36%, while Germany’s DAX 30 was up 0.45% by 03:30 a.m. ET (07:30 GMT).

Market participants were looking ahead to the preliminary report on euro zone consumer price inflation for January.

Last week, European Central Bank President Mario Draghi said the central bank's policymakers were still waiting for a sustained rise in inflation toward its target of around 2%.

Financial stocks were mixed, as French lenders Societe Generale (PA:SOGN) and BNP Paribas (PA:BNPP) fell 0.12% and 0.42%, while Germany's Commerzbank (DE:CBKG) and Deutsche Bank (DE:DBKGn) gained 0.04% and 0.62%.

Among peripheral lenders, Unicredit (MI:CRDI) slipped 0.10% and Intesa Sanpaol rose 0.29% in Italy, while Spanish banks BBVA (MC:BBVA) and Banco Santander (MC:SAN) gained 0.12% and 0.59% respectively.

Elsewhere, Hennes & Mauritz AB (ST:HMb) shares jumped 1.26% even after the retailer reported a 32% net profit decline in the fourth quarter.

The company also made headlines after announcing the removal of a range of socks amid claims a pattern on them resembles Allah written in Arabic upside-down.

The news came only weeks after the company was accused of racism over an ad showing a black child dressed in a sweatshirt reading 'coolest monkey in the jungle.'

Infineon Technologies AG NA O.N. (DE:IFXGn) added to gains, as shares rallied 1.32% after reporting a 27% climb in its first-quarter net profit. However, the electronic parts supplier also cut its outlook for its fiscal year 2018, citing currency headwindst.

In London, FTSE 100 inched up 0.02%, helped by SSE (LON:SSE), whose shares surged 1.78% amid reports the energy supplier is in early talks with the UK competition watchdog over its proposal to merge and spin off its UK household supply operations with those of rival Npower.

BAE Systems (LON:BAES) was also on the upside, as shares rallied 1.06%, boosted by news the
U.S. army selected the company to develop advanced precision guidance kits for artillery shells.

Meanwhile, Capita PLC (LON:CPI) was the worst performer on the index as shares dove 34.69% after the company issued a profit warning for 2018 and its new Chief Executive Jonathan Lewis declared the group “too complex”, “driven by a short-term focus” and “lacking operational discipline and financial flexibility”.

Financial stocks added to losses, with Barclays (LON:BARC) dipping 0.03% and HSBC Holdings (LON:HSBA) dropping 0.38%, while Lloyds Banking (LON:LLOY) declining and the Royal Bank of Scotland (LON:RBS) declined 0.45% and 0.55% respectively.

Mining stocks were also broadly lower on the commodity-heavy index. Shares in BHP Billiton (LON:BLT) fell 0.22% and Anglo American (LON:AAL) slumped 0.50%, while Rio Tinto (LON:RIO) retreated 0.75%.

In the U.S., equity markets pointed to a higher open. The Dow Jones Industrial Average futures pointed to a 0.36% gain, S&P 500 futures signaled a 0.36% rise, while the Nasdaq 100 futures indicated a 0.39% increase.

German Five-Year Yield Rises to Highest Level in Over Two Years

European Stock Markets

German five-year bond yields broke above zero percent for the first time since December 2015 after a member of the European Central Bank Governing Council said there isn’t a single reason anymore to continue with quantitative easing.

Yields rose across the euro area after Klaas Knot said Sunday that the program has done what could realistically be expected of it. Widely considered one of the safest assets to own, German bunds have sold off this year as the ECB is seen to be drawing closer to the first interest-rate increase since 2011.

Weakness in U.S. Treasury futures during Asian hours also weighed on sentiment, traders said.

Bond yields in major global markets are rising as central banks from the Federal Reserve to the ECB and the Bank of England begin to withdraw extraordinary monetary stimulus measures that were in place for years as part of efforts to revive inflation.

In Europe, expectations are growing that the central bank will phase out its asset-purchase program before the end of this year and raise benchmark rates in the next for the first time since 2011.

German five-year yields were two basis points higher at minus 0.02 percent as of 8:27 a.m. in London, after rising earlier to 0.003 percent. Those on their 10-year counterparts climbed two basis points to 0.65 percent.

Italian 10-year yields were little changed at 2.01 percent, with the spread over bunds declining by two basis points to 136.

Short-term yields have remained negative in European government debt markets from Germany to Italy and Spain and in recent years as the central bank kept its benchmark rates at levels below zero and pumped cash into the financial system via asset purchases.

That trend is now beginning to reverse, with markets now pricing in an increase of almost 14 basis points in the monetary authority’s deposit rate by March 2019.

ECB President Mario Draghi hasn’t specified an end date for the central bank’s unprecedented quantitative easing, but expressed increased confidence that inflation would converge to the bank’s near 2 percent target at the last decision on Thursday. Knot said that while the bank doesn’t have to communicate a fixed end date yet.

London: Stocks to kick off 2018 in record territory

European Stock Markets

Stocks in Europe slipped lower in the first trading session of the new year, but U.S. futures and markets in the Asia-Pacific region mostly pushed higher following steep price rises across global indexes last year. 

The Stoxx Europe declined 0.1% in early trade, dragged down by a 0.5% fall in Germany’s Dax index. Futures markets pointed to a 0.2% opening gain for the Dow Jones Industrial. Stocks in the Asia-Pacific region mostly rose.

Many investors head into 2018 confident that the yearlong market rally can continue amid a strengthening global recovery and corporate earnings growth. Hefty share price gains across the globe added more than $9 trillion in market value to equity markets in 2017. The Dow Jones
Industrial Average surged 25% last year, while the S&P 500 rose over 19%.

Those steep gains have made some investors cautious. But many are penciling in further stock price rises in 2018 thanks to firming global growth, while the Republican tax overhaul is expected to boost earnings at many companies.

In Europe, France’s CAC 40, the U.K.’s FTSE 100 and Germany’s DAX all started the year lower amid declines in autos and mining shares.

Equities in Hong Kong and mainland China led gains in the Asia-Pacific region Tuesday. The Hang Seng was up 1.9%, thanks in part to gains by Chinese messaging-and-gaming heavyweight Tencent’s. But financials were the most-important segment for the benchmark, making up more than half of the advance.

There were also gains for tech stocks, which suffered steep declines last year following a global pullback from the sector. Shares in smartphone components suppliers Sunny Optical and AAC Technologies jumped 10% and 7% respectively, while Taiwan’s Largan Precision , 3008 5.85% which makes lenses for smartphone cameras, closed up 5.9% in Taiwan after skidding 22% in December. It helped the Taiex rise 0.6% and finish at a five-week high.

China’s Shanghai Composite Index rose 1.2%.

One laggard Tuesday was Australia, where the stock benchmark fell 0.1% despite gains in commodity stocks. Banks, a big portion of the equities market there, started 2018 lower. Analysts have previously expressed concerns that higher global interest rates could add to the economic pressure from high household debt in Australia. The S&P/ASX 200 overall ended 2017 with its best three months since the first quarter of 2015.

Markets in Japan were closed Tuesday.

In currencies, the U.S. dollar started 2018 as it ended last year—lower. The WSJ Dollar Index was recently off 0.2% after falling to its lowest level since late September on Friday. Last year, the index slid 7.5%, its worst year since 2003.

In bond markets, the yield on the 10-year Treasury note was at 2.428% Tuesday from 2.409% on Friday.

In commodity markets, Brent crude oil was up 0.2% at $67.00 a barrel

Euro heads higher as ECB heads for the exit

The euro climbed for a third day and stocks slipped to a month low on Thursday, as traders waited for formal confirmation from the European Central Bank that will take its biggest step yet in unwinding years of loose monetary policy.

Banking stocks were also in focus as Europe’s Deutsche Bank <DBKGn.DE > and Barclays (BARC.L) both tumbled after results, and South Africa’s markets lurched lower again after its budget on Wednesday had rattled investors. 

In a pre-ECB appetiser, Sweden and Norway’s central banks both kept their interest rates on hold. Their currencies barely budged though as attention remained firmly on a euro camped at a 1-week high of $1.1820 and up 12.5 percent for the year. [/FRX] 

The ECB will announce its policy decision at 1145 GMT and hold a news conference at 1230 GMT.

It is expected to say that from the start of next year it will be pumping either 30 or 40 billion euros a month into euro zone bond markets, rather than the current rate of 60 billion a month. 

Markets will also be looking at how long it plans to maintain that new rate and for any tweak in language on when it may start actually raising its currently negative interest rates.

“The pace they decrease the bond buying is the important factor, I would say they cut (the purchases) by 20 billion (a month) considering how the market is,” said SEB investment management’s global head of asset allocation, Hans Peterson. 

European bonds, which like other global fixed income markets have seen a selloff over the last week, remained subdued. 

Benchmark German Bund yields DE10YT=TWEB hovered at just over 0.47 percent after U.S. Treasury yields US10YT=RR had hit a seven-month high of 2.4750 percent overnight. [GVD/EUR]

European shares struck 4-week lows too before they managed to steady. 

While bank stocks .SX7P were the main drag, former mobile phone giant Nokia (NOKIA.HE) was the biggest individual faller as weak earning from its now mainstay networks equipment business sent its shares down as much as 14 percent. [.EU]