Europe climbs after US record closes

With low volumes and US markets closed for Thanksgiving, the residual optimism from record closes in US indices last night has seen European bourses drift higher in early trade.

News that Rio Tinto is following the strategy of its competitors, in plans to expand its iron ore output by 20% over the next three years in an effort to capture greater demand, has seen the stock take the top spot on the FTSE this morning. Chinese steel mill demand has helped to keep iron ore outperforming other base metals, yet the mining sector continues to be a drag on the FTSE 100 as a whole as other European benchmarks trade near or at all-time highs.

Kingfisher posted profit for the third quarter which was lower than expected. Consumer confidence in France is exceptionally weak at present, so the outlook from the home improvements retailer is bordering on pessimistic in spite of better like-for-like sales in the UK and Ireland. The share price lost 5% in early trade.

Retail sales revenue in the eurozone has disappointed and has continued to show a weaker pace than the first half of this year, despite the mild increase month-on-month to 48. The divergence between the likes of Italy and Germany continues to be the driver of the contraction. 

Private sector lending within the single currency union is also of concern as it continues to slide, dropping sharply by 2.1% in October following a 2% decline in September. This may well give weight to recent reports that the European Central Bank may follow the Bank of England in a Funding for Lending style long-term refinancing operation package for European banks.

The stability of the current financial system, never too far from market focus, will be reported on today with Bank of England governor Mark Carney likely to focus on the UK housing boom, including potential necessary actions to cool what many are calling a bubble.

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