German stocks lead the way in Europe this morning, with mainland indices enjoying a fresh surge of buying pressure as traders continue to rotate into global equities off the back of a somewhat downbeat US close.
However, the strength seen in Europe also comes from improved earnings data from some of the big hitters.
In Germany, shares of engineering giant Siemens surged 6% after the company raised its profit outlook and highlighted growth opportunities within the industrial AI sector.
Meanwhile in France, gains for RayBan maker Essilor Luxottica and French industrial group Legrand helped lift the CAC 0.7% higher.
On the data-front, the UK brought a fresh data deluge this morning, with the 0.1% GDP figure for the fourth quarter serving to highlight the tepid growth that belies the story told by the stock market. After-all, with the FTSE 100 hitting fresh record highs on a weekly basis, we are seeing a perfect example of the fact that the index is not a reflection of economic performance.
Coming at a time where the government is under pressure to prove their credentials given the scandal surrounding Peter Mandleson, today’s data didn’t provide much to shout about for Starmer and Reeves. Notably, Q4 saw zero growth for the all-important services sector, while the latest industrial (-0.9%) and manufacturing (-0.5%) production figures further heightened concerns around the UK economy.
For the Bank of England, this is a clear sign that they need to do more, with expectations of sharp disinflation over the coming months making rate cuts highly likely.
US markets are still attempting to digest yesterday’s jobs report data, with the bumper 130k payrolls beat counteracted by a concerning -862k write-down for 2025 jobs.
Notably, there was something for everyone in the report, and while the immediate reaction came in response to the stronger monthly NFP figure and lower unemployment rate, much of that strength once again appears to be focused on a small subsection of the economy (health and education).
While Biden relied on strong government hiring to prop up the jobs numbers, Trump’s push back towards private sector hiring has helped weaken the jobs picture. Nonetheless, despite the overwhelming response that this report essentially writes off any Fed action over the coming meetings, the weak distribution of job growth does show a need to strengthen the economy further. All eyes now turn to tomorrow’s inflation report.
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