The London market moved higher on at the beginning of the week as the prospect of a boost for the European economy helped make up for dismal economic news from Japan.
European Central Bank president Mario Draghi hinted that quantitative easing could be on the cards to boost the lackluster Eurozone economy.
Draghi told the European Parliament that further measures “could include further changes to the size and composition of the Eurosystem balance sheet, if warranted, to achieve price stability over the medium term.”
The fall in Japan’s GDP in the third quarter helps to explain the reason for the Bank of Japan’s surprise expansion of its QQE programme last month.
Economic news from the Eurozone continues to be poor with updates on manufacturing and services data on Thursday.
Data showed euro zone business growth this month was weaker than economists expected, with orders dropping for the first time in more than a year despite price cuts showing that Europe’s economy is far from out of the woods.
Back in the UK, the recovery in British manufacturing slowed in November as a result of sluggish export demand, the Confederation of British Industry’s (CBI) industrial trends survey showed.
But UK retail sales soared last month, advancing by 0.8% month-on-month and 4.3% on the year and led by non-food sales, according to the Office for National Statistics (ONS). Discounting was widespread and on a seasonally adjusted basis the figures were lower than would normally be expected given performance in recent months. moving forward, while there is a case to be made for a good Christmas for consumers with sales discounts likely to open earlier and be deeper than years before, the outlook for the high street as a whole is not a good one.
The Bank of England’s Monetary Policy Committee once again voted 7-2 in favor of maintaining UK interest rates at their current level of 0.5%. The consensus view of the body was that, “the outlook for inflation in the medium term justified maintaining the current stance of monetary policy” and that “a prolonged period in which inflation was below the target created at least the possibility that medium-term expectations of inflation would begin to drift downwards. This had the potential to lengthen the period for which inflation itself would remain below 2%“.
Real wages in the UK fell for the 6th consecutive year over the 12 months to April, according to new figures from the Office for National Statistics.
A surprise cut in Chinese interest rates and hints about quantitative easing from the European Central Bank boosted the London market on Friday.
The People’s Bank of China cheered markets by reducing its one-year benchmark lending rate to provide a boost to its slowing economy.
The news from Beijing boosted miners, which led the top-flight index higher.