Stock markets in Asia and Europe snapped their losing run Wednesday, as some brighter economic data from Europe and improved prospects for Asia’s exporters broke the spell of collapsing oil prices.
For most of this week, global markets haven’t been in a mood to distinguish between the problems of the oil market, and those of the wider world, preferring to see the slump in crude as a simple reflection of collapsing demand across the globe.
But that perception seemed to change Wednesday. The Nikkei stabilized as investors in Japan started to focus again on the improved outlook for exporters thanks to the yen’s fall against the dollar. Meanwhile in Germany, the DAX index rose 1% after unemployment fell by a stronger-than-expected 27,000 in seasonally-adjusted terms in December, bringing the jobless rate down to 6.5%.
Germany also reported a stronger-than-expected 1% rise in retail sales in November, although it also revised previous months’ data lower.
“Encouraged by record employment, rising wages and falling oil prices, consumers opened their wallets more than before,” said Holger Schmieding, chief economist at Berenberg Bank. He said low oil prices should provide a “massive tailwind” to consumer demand in Germany this year.
Problems elsewhere in the Eurozone meant that the region-wide jobless rate stayed at 11.5%, as expected. And there was worse news on the price front, with figures showing that consumer price inflation fell into negative territory for the first time since 2009. That was due overwhelmingly to a 6.3% drop in energy prices. Eurostat reported a headline CPI number of -0.2%, but said “core” CPI, excluding energy, food and tobacco, rose to 0.8% from 0.7% a month earlier, somewhat alleviating fears of deflation in the 19-country currency union.
Even the core CPI figure of 0.8% is well below the European Central Bank’s target of just under 2%, and the data reinforced expectations that the ECB will announce a wider bond-buying program at its council meeting on Jan. 22 to support the economy. But such expectations have already propelled Eurozone bond markets to record highs, and the absence of any major new shocks led them to pull back in early trading Wednesday.
The economic data also seemed to reverse the momentum in oil, which market participants considered heavily oversold after losing 10% already this year. The NYMEX crude benchmark rose by more than a dollar from a new low of $47 a barrel to stand at $48.50 by mid-morning in London.
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