Fundamental Analysis
EUR
“Ifo index paints a too positive picture of the growth prospects for the German economy”
- Carsten Brzeski, senior economist at ING Group
German business confidence unexpectedly improved in April, a sign the euro zone’s largest economy is weathering Europe’s debt crisis. Ifo business climate index, which is based on a survey of 7,000 businesses, rose to 109.9 points from 109.8 points in March.
“German companies taught nervous financial markets another important lesson today,” said Andreas Rees, an economist at UniCredit Group in Munich. “One should not underestimate the German economy and its resilience.”
“Today’s Ifo index paints a too positive picture of the growth prospects for the German economy,” said Carsten Brzeski, senior economist at ING Group in Brussels.
European stocks rose on Friday.
The Stoxx Europe 600 Index rose 0.50 per cent to 257.79. Germany’s DAX Index increased 1.18 per cent and France’s CAC 40 Index gained 0.46 per cent.
USD
“A strong Germany helps the euro massively, and helps other assets too”
- Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd.
U.S. stocks closed mixed on Friday while German investor confidence unexpectedly improved and blue chip companies from General Electrics to Microsoft reported better than expected earnings.
The Standard & Poor's 500 gained 0.12%, or 1.61 points, to 1,378.53. The Dow Jones Industrial Average surged by 0.50%, or 65.16 points, to 13,029.26. The Nasdaq Composite Index lost 0.24%, or 7.11 points, to 3,000.45.
“A strong Germany helps the euro massively, and helps other assets too,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London.
“The Ifo is a confidence measure, it’s a straight correlation with assets. The level of confidence is the most important factor behind markets.”
GBP
“While the month of March certainly provided a nice boost for retailers it's not really an indication of a broader recovery”
- Natalie Berg, a retail analyst with Planet Retail
U.K. month on month retail sales rose more than economists forecast in March, said the Office for National Statistics on Friday. Total retail sales rose 1.8 per cent from February, when they declined 0.8 per cent.
“There may be signs the consumer is returning to life,” said Peter Dixon, an economist at Commerzbank AG in London.
“In a wider context, it’s added a bit more to consumption in the first quarter and therefore boosted the GDP number slightly. I think it’ll be sufficient to avoid a negative number.”
“Wage growth is at just 1.4%, so we are still seeing the ongoing erosion of spending power among consumers,” said Natalie Berg, a retail analyst with Planet Retail.
“While the month of March certainly provided a nice boost for retailers it's not really an indication of a broader recovery,” she said.
CHF
“Worries about Europe still hang as a specter, ready to fall without a warning”
- Manish Singh, the London-based head of investment at Crossbridge Capital
Swiss stocks edged higher on Friday after German business confidence rose and U.S. companies reported better than expected earnings.
The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, rose 0.55%, or 34.01 points, to 6,237.79. The broader Swiss Performance Index gained 0.49%, or 27.93 points, to 5,737.83.
“There seems to be a tug-of-war between better first-quarter corporate earnings sending a positive signal and concern regarding the European debt crisis as a negative,” said Manish Singh, the London-based head of investment at Crossbridge Capital.
“There is a clear lack of conviction in the market. For every piece of good news, there is always a negative that overrides it. Worries about Europe still hang as a specter, ready to fall without a warning.”
JPY
“I still think Europe overall is just buying time for its problem, which cannot be resolved in the short term” - Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd.
Japanese stocks fell on Friday after U.S. economic data showed the recovery in the world’s largest economy is losing momentum.
The Nikkei 225 erased 0.28%, or 27.02 points, to 9,561.36. The broader Topix retreated 0.27%, or 2.19, to 811.94.
“I still think Europe overall is just buying time for its problem, which cannot be resolved in the short term,” said Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd.
“From time to time in the next few years I think we will see panic situations. The market is very thin and liquidity is low, so if someone wants to push the market down it won’t be too difficult. Investors are holding a lot of cash.”
