European Market Update 2/12 - UK House Prices Reach Highest Level Since March 2005

- The European indices are currently trading sharply lower on fears that earnings growth in the technology industry will slow down. An analyst at Julius Baer said earlier today that that the decline in the technology sector can largely be attributed to poor market sentiment.
- European government bonds are trading lower in the session after some hawkish ECB speak last week. EGBs are also trading lower as new supply runs heavy at €18B this week as compared to €1.1B last week. Gilts are trading lower in the UK, relatively unaffected by PPI and house price data.
- UK DCLG House prices reached their highest level since March of 2005 in the month of December. The y/y change in London was 11.8%, while the y/y change in the UK excluding London was 9.4%. The average house price rose to £201,090 during December.
- PPI input in the UK fell to its lowest level since March of 2004 M/M and November 2002 Y/Y, while PPI output rose the most in six months on a M/M basis adding to the case that the Bank of England will need to raise interest rates within the coming months. Signs that companies in the UK are raising prices may push the BOE to raise rates soon according to some analysts pointing out that firms may try to restore profit margins with higher prices while paying lower costs.
- A German official said overnight that Germany is studying an Iranian proposal for possibly restarting nuclear negotiations. The EU has reportedly reached an agreement for the technical implementations of sanctions.
- The IEA’s Mandil said overnight that oil markets are currently well supplied. Mandil said that stocks are at an acceptable level, noting that further talks of any OPEC cuts are unwelcome. An OPEC representative said overnight that world oil markets are currently oversupplied by approximately 300K barrels per day. The Qatari oil minister said overnight that there is no need for another OPEC output cut if market conditions do not change. The Qatari oil minister also said that oil below $50 per barrel is bad for producers, while oil above $60 is bad for consumers. Front month crude futures are currently trading lower in the session and sit just above the $59 handle.