Market update: European stocks open lower as investors consolidate recent gains

Better-than-expected US retail sales data for December helped the S&P 500 and Dow Jones to rebound from early falls yesterday, with the indexes closing up 0.1% and 0.2% respectively. Economic news from the US was not all rosy, however, with leading indicators of manufacturing output down for the sixth month in a row. Investors will have had a chance to absorb results from Goldman Sachs and JPMorgan Chase before US markets open today, particularly the latter’s response to the US$6 billion trading losses the company posted last year.

Closer to home, European stocks started the morning in retreat as investors consolidated after the significant gains seen in recent weeks. At the time of writing the FTSE 100 is down 0.6%, while the FTSE Eurofirst is down by 0.3%. Investors’ risk appetite was dented by news of a preliminary estimate that Germany’s economy contracted in the final quarter of 2012, with lower company spending on plants and machinery cited as a key cause. Uncertainty surrounding the UK’s AAA credit rating and the consequences of a referendum on European Union membership created headwinds for the UK’s leading index ahead of next week, when the Office for National Statistics announces its gross domestic product (GDP) growth estimates for Q4 2012.

Profit-taking in Japan saw the Nikkei 225 close down 2.6%, its biggest single-day fall in eight months. This follows a significant rise of 21.6% in the Nikkei since the start of November, with a weakening yen providing a significant boost to Japanese exports.