Early in the week gains across Europe – sparked by ongoing speculation about monetary easing by the European Central Bank – were later erased after some mixed economic indicators from the States.
Annualised US gross domestic product (GDP) growth for the third quarter was revised higher to 3.9%, up from the initial estimate of 3.5%, surprising analysts who had expected a downwards revision to 3.3%.
The upside surprise is another reason to expect the Fed to begin normalising interest rates sooner than expected next year, predictions now are for the Federal Reserve will start hiking rates in March 2015.
However, sentiment was dampened by the data which showed that US consumer confidence unexpectedly tumbled in November, while annual US house-price inflation eased to its slowest pace in two years in September.
Figures showed that Germany avoided recession with the economy expanding by 0.1% in the third quarter, while UK mortgage approvals dropped to a 17-month low in October.
UK GDP grew by 3% in the third quarter, the Office for National Statistics confirmed on Wednesday morning. Quarter-on-quarter growth is also forecast to be unchanged from the initial 0.7% reading.
Just like yesterday’s US number, [the UK GDP data] is a second revision and thus there is a possibility that it simply confirms the 0.7% figure revealed last month.
Thursday’s pre-Thanksgiving barrage of US data kept markets on the hop but provided little good news.
US jobless claims increased by 21,000 to 313,000 last week, well above the 288,000 expected by the market and the highest level registered in 11 weeks.
A wave of other US data also came in worse than forecasts, including personal spending figures, the Chicago manufacturing survey, the University of Michigan consumer-confidence index, and pending home sales. Data on durable-goods orders was the only indicator to beat expectations by unexpectedly rising 0.4% in October.
Markets across Europe finished mostly lower after European Central Bank vice president Vitor Constancio said the Bank may consider sovereign bond-buying early next year. His comments “suggested full sovereign quantitative easing would not come until next year”
While US markets will be closed for the Thanksgiving holiday, a number of ‘risk events’ during the session could prompt some market volatility, with the OPEC meeting likely to grab the most focus as crude prices extended a four-year low.
Brent crude fell the fourth day in London, dropping as much as 1.9% to $76.28 a barrel.
Somewhat unexpectedly, at Thursday’s summit, in Vienna, the Organization of Petroleum Exporting Countries (OPEC) decided not to cut its current “official” level of production, in effect admitting that their power to influence the market is now diminished.
On the other hand, it might be the best way to force others to help share the burden of stabilising prices, they seem to have reasoned.
In any case, it is not every day that one sees Brent futures drop by almost 7%. As of 17:18 they were off by 6.6% to $72.63 per barrel on the ICE.
Meanwhile, West Texas Intermediate oil was extending losses after falling below $70 a barrel on Thursday, its first time below this mark since mid-2010. While oil producers will be directly bearing the brunt of the recent slump in prices, it is also likely to raise the pressure on central banks across the globe currently battling against deflation, such as those in Japan and Europe. Overnight, it was revealed that Japanese inflation eased further in October, raising the pressure on prime minister Shinzo Abe ahead of the snap elections next month. Inflation slowed to 2.9%, but was just 0.9% when adjusting for the sales-tax hike earlier this year. This was further away from the government’s 2% target and the first sub-1% inflation reading in 14 months.