European markets are trading cautiously this morning, despite a broadly positive Asia session, and more decent economic reports from Germany, with most of the focus at the end of a fairly choppy week on retailers as the Black Friday sales get under way in earnest. After two successive weeks of losses we do appear to be seeing some stabilisation but the overall mood appears to be one of caution.
Politics has continued to take a back seat even as the SPD starts to soften its opposition to supporting Angela Merkel as leader of a new German government.
For retailers who have had a turbulent and in some cases a difficult year, the next few days are likely to be crucial when it comes to whether they finish the year in the black. This morning’s news from the Centre for Economics and Business Research that UK consumer confidence has hit its lowest level since the aftermath of the Brexit referendum last year has added to the gloomy tone with this month’s rate rise by the Bank of England cited as one of the main reasons for the drop.
This doesn’t really chime with the retail sales numbers we saw from the CBI yesterday which bounced back strongly from a poor October, but consumer confidence readings aren’t exactly renowned for their symbiotic relationship with consumer spending patterns. The belief that a slowdown in house price growth can be perceived as a bad thing when a house purchase remains out of reach to so many people strikes me as a false premise.
Consumer goods stocks have edged slightly higher after China cut tariffs on a range of goods from whisky to baby milk powder and this has helped Diageo (LON:DGE) and Danone (LON:0KFX) outperform the wider market. Whisky tariffs have been halved to 5% while formula milk tariffs were cut to zero.
On the data front the latest German IFO business climate survey reinforced the bumper PMI numbers we saw yesterday, coming in at 117.5, a record post-unification high, and up from 116.7 in October.
US markets, in what will be a holiday shortened session, aren’t expected to open too far from where they closed on Wednesday, with the main items on the agenda, the latest flash PMI’s for manufacturing and services for the US economy, with modest increases expected in both.
Dow Jones is expected to open unchanged at 23,526
S&P500 is expected to open 2 points higher at 2,599
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