Eurozone stock markets are heading south, led by a more than 1% decline in the Italian MIB index. Banks are under pressure led by Deutsche Banks as the U.S. Department of Justice called for a USD 14 billion settlement payment for miss-selling of mortgage backed securities during the U.S. housing bubble. The larger than expected figure is also weighing on bank stocks in the rest of Europe, although the FTSE 100 managed to come back from earlier lows and is currently posting a small rise, against a loss in the DAX in early afternoon trade. Latest on Friday the U.S. will report CPI and Sentiment.
U.S. stock futures are also down, and the broad move higher on global stock markets Thursday has proved short lived, even as fears about a September Fed hike have abated somewhat. The Bank of Japan and Fed remain in focus, as they will have monetary policy decision next week. Japanese markets will be closed Monday for a 3-day weekend in Japan. Oil prices are also lower, with WTI trading at USD 43.20 per barrel in early afternoon trade.
Eurozone Labor Cost Rise in Q2
Eurozone labor costs rose just 1.0% year over year in Q2, while Q1 was revised down to 1.6% year over year from 1.7% year over year reported initially. Increases vary considerably across countries, but the marked deceleration in the German annual rate to 1.8% year over year from 2.8% year over year in the previous quarter, will have played a role.
Oil prices are down over 1%, reversing about half of Thursday’s gain. Reopening supply from Libya and Nigeria, coupled with rising operational rig counts in the U.S, has weighed on prices. This fits the narrative put out by the IEA’s monthly report, which forecast a lasting supply glut into 2017. Focus Friday will be on Baker Hughes rig count data in the U.S. Seven rigs were added in the last reporting week, to September 9.
The first release on September Michigan Sentiment is out on Friday and the market expects the headline to climb to 90.5 to cap the recent string of declines that had the headline falling to 89.8 in August from 90.0 in July and 93.5 in June. The already released IBD/TIPP Poll for the month fell to 46.7 from 48.4 in August and this should create a drag on the Consumer Confidence headline which could fall to 98.0 from 101.1 in August.
On the inflation front, U.S. August CPI is out on Friday and is expected to to see a 0.1% headline increase with the core up 0.2%. This follows July data which had the headline unchanged and the core up 0.1% on the month. The August PPI was released Thursday and featured a flat headline with a 0.1% core increase for the month.
The post originally appeared on Oil-Trading.CO at http://www.oil-trading.co/oil-analysis-blog/bank-stocks-lead-eurozone-markets-lower-following-doj-settlement-request