European stocks at five-and-a-half-month high ahead of growth data

LONDON - 31 October 2017: European shares were at a 5 1/2-month high and Italian bonds were set for their best month in over two years on Thursday, before the release of data expected to underscore the robust improvement in the euro zone’s economy.

Monthly figures from Eurostat were forecast to show growth in the 19-country bloc now running at almost 2.5 percent year-on-year and unemployment at its lowest since early 2009 at 9 percent.

Markets in London, Frankfurt and Paris were just about positive as trading gathered momentum, after Asian markets had mostly risen overnight despite some disappointing industrial data from China [.SS] and a dip on Wall Street [.N].

Focus was also on the dollar, which had been hit on Monday by fresh political unease [/FRX].

Federal investigators probing Russian interference in the 2016 U.S. election charged President Donald Trump’s former campaign manager, Paul Manafort, and another aide, Rick Gates, with money laundering.

“The market is not sure what to make of the political news out of the U.S., so it’s almost ground to a halt,” said Societe Generale strategist Kit Juckes.

“Unless we get a shock (from European data or something else) we are waiting for the bigger events of the week. We are waiting for the Fed chair announcement, we are waiting for the jobs data on Friday.”

Italy’s borrowing costs were set to end October with their biggest monthly drop in more than two years after a surprise ratings upgrade, the extension of the ECB’s bond buying program and the approval of a new electoral system [GVD/EUR].

Italy’s benchmark 10-year bond yield fell to its lowest level in around 10 months at 1.837 percent IT10YT=TWEB. It is down around 33 basis points this month, on track for the biggest monthly drop since July 2015, according to Tradeweb data.
Earnings company updates added some spice meanwhile.

Shares in heavyweight oil major BP (BP.L) jumped more than 3 percent to their highest since July 2014, after third quarter profits beat expectations and it announced a share buyback program.

Ryanair (RYA.I), hurt recently by to swathes of canceled flights, climbed more than 5 percent after it maintained its full-year profit guidance. BNP Paribas (BNPP.PA) sank 3 percent after its results disappointed.

So far, more than 40 percent of MSCI Europe companies have reported results for the third quarter, of which 65 percent have either met or beaten expectations, according to Thomson Reuters I/B/E/S data.

Financials and tech are sectors standing out for their large proportion of beats. [.EU]

CHINA DATA

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS ended up 0.4 percent.

Strong gains in South Korea and Taiwan, which make up roughly a quarter of the index’s weighting, helped offset weakness in China and Hong Kong.

Chinese data had shown a sharper-than-expected slowdown in October factory growth.

Beijing’s war on winter air pollution is forcing many northern steel mills, smelters and factories to curtail production, adding to uncertainty amid early signs of a slowdown in the world’s second-largest economy.

South Korea's KOSPI .KS11 ended up 1 percent at a record high, though, after Seoul
and Beijing agreed to normalize relations that have been strained by a year-long standoff over the deployment of a U.S. anti-missile system in South Korea.

“Shares that have long been pressured by ongoing political disputes between the two countries are reacting positively to the announcement, including Hyundai Motor-related stocks,” said Cho Byung-hyun, a stock analyst at Yuanta Securities.

Tech-heavy Taiwan .TWII added 0.4 percent after Apple (AAPL.O) made big gains overnight on hopes of strong demand for its new range of iPhones.

Japan's Nikkei .N225 closed flat, capped by weaker U.S. shares and a stronger yen.

The dollar hovered near a 10-day low of 113.02 yen JPY= struck overnight. The greenback had lost about 0.4 percent overnight after details of charges for former Trump aides were disclosed.
The euro was softer at $1.1637 EUR=. It had pulled back overnight from a three-month low of $1.1574 on Friday.

Among commodities, crude oil prices steadied below their recent peaks after being boosted by expectations OPEC-led production cuts would be extended beyond March.

Brent crude futures LCOc1 were down 0.5 percent at $60.58 a barrel after rising to $61 overnight, the highest since July 2015.

U.S. crude CLc1 was 0.3 percent lower at $53.98 after touching $54.46, its highest since late February.

Spot gold XAU= was little changed at $1,275.49 per ounce at 0850 GMT. It has shed about 0.3 percent so far in October, in what could be its second straight monthly decline.