Day Trading Markets Get a Boost from GDP Data
Equity markets got an early boost this morning as Germany, France and Spain all posted better than expected Q2 GDP figures with Germany posting a 2.2% gain, its best performance in 23 years, against an expectation of 1.3%.
Euro zone GDP also came in higher than expected at 1% boosted by the lower single currency and surging export growth out of Germany.
One thing it does do is highlight the two tier state of the Euro zone, contrasting Greece’s 1.5% contraction in GDP, earlier this week.
However the gains were somewhat short lived as markets re-focussed their attention on the this afternoons figures out of the US later today, and especially as European Central Bank President Trichet had warned earlier this week that growth was likely to be much more subdued into Q3.
In the day trading markets the big movers today were Aviva after a news report that the company spurned an advance from rival RSA Group which wanted to buy the firm’s general insurance operations for a tasty £5bn.
Mining company Vedanta Resources is near the bottom of the FTSE after announcing is set to move into the oil business within the next few days if it can finalise a deal for a majority stake in Cairn India.
BP has slipped lower after being fined a record $50.6m for safety violations at its Texas City refinery, the troubled plant where 15 men were killed after a 2005 explosion. The firm will also invest $500m between now and 2016 to improve safety at the US refinery.
In spread trading, the US markets initially opened lower despite US CPI and retail sales data rising in July in a hopeful sign for the economy. Retail sales climbed 0.4 percent last month following a revised 0.3 percent drop in June, while higher fuel costs helped lift U.S. consumer prices in July, the first rise in four months. US consumer sentiment also rose in August to 69.6 from 67.8 in July, and above expectations of 69.3 giving the Dow a brief boost dragging markets in Europe off their lows heading into the close.
The single currency has continued its recent slide against the US dollar and sterling, falling through key support levels, as the market put aside the better than expected GDP data on fears that continued sovereign debt problems within the Euro zone will continue to weigh on sentiment.
Spreads on Spanish and Greek bonds against German bonds have widened to their largest levels since June, while a poor 10 year Italian bond auction has also weighed.
By Michael Hewson, Market Analyst, CMC Markets.
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