European Equities: Economic Data, ECB President Lagarde, and U.S Earnings in Focus
It’s a busier day ahead, with key stats from the Eurozone and the U.S in focus. Trade data from China ahead of the European open will set the tone, however.Spanish CPI (YoY) (Dec) Final
Spanish HICP (YoY) (Dec) Final
Eurozone Trade Balance (Nov)
ECB President Lagarde Speaks
The Majors
It was a mixed day for the European majors on Thursday. The DAX30 rose by 0.13%, while the CAC40 and the EuroStoxx600 ended the day with losses of 0.50% and by 0.05% respectively. It was a 3rd consecutive day in the green for the DAX30.
From the Eurozone, the ECB’s Economic Bulletin delivered more uncertainty following the latest spike in U.S inflation. Upward revisions to inflation and downward revisions to growth forecasts were market negative.
Economic data from the U.S also disappointed, with jobless claims unexpectedly rising in the week ending 7th January.
The Stats
There were no major stats from the Eurozone for the markets to consider, leaving the ECB Economic Bulletin in focus.
The ECB Economic Bulletin
Salient points from today’s Economic Bulletin included:
- Global economy remains on a recovery path, although persisting supply bottlenecks, rising commodity prices, and Omicron weigh on near-term growth prospects.
- Recent surveys suggest that growth momentum remained weak at the start of Q4.
- While the euro area economy continues to recover, growth is also moderating.
- Activity is expected to pick up strongly om the course of the year, however.
- Output should exceed pre-pandemic levels in Q1 of 2022.
- While supply chain bottlenecks persist, these should ease during 2022.
Growth
- Projections are for annual growth of 5.1% in 2021, 4.2% in 2022, 2.9% in 2023, and 1.6% in 2024. Compared with September forecasts, 2022 growth was revised down, while 2023 growth was upwardly revised.
Inflation
- Inflation will remain above 2% for most of 2022 and is expected to remain elevated in the near-term.
- The ECB expects energy prices to stabilize, consumption patterns to normalize, and price pressures stemming from global supply bottlenecks to subside this year.
- December annual inflation forecasts were 2.6% in 2021, 3.2% in 2022, and 1.8% in 2023 and 2024. These were materially higher than September projections.
From the U.S
Wholesale inflation figures were in focus following consumer inflation figures from Wednesday along with jobless claims.
In the week ending 7th December, initial jobless claims rose from 207k to 230k. Economists had forecast a fall to 200k.
On the inflation front, the producer price index rose by just 0.2% in December versus a forecasted 0.4% increase. In November, the index had risen by 1.0%. The Core producer price index rose by 0.5% after having risen by 0.9% in November. Economists had forecast a 0.5% increase.
The annual wholesale rate of inflation softened from 9.8% to 9.7% in December.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Thursday. Continental and Daimler led the way, with gains of 2.73% and 2.74% respectively. BMW and Volkswagen ended the day up by 1.61% and by 0.92% respectively.
It was a mixed day for the banks, however. Deutsche Bank fell by 0.20%, while Commerzbank rose by 1.15%.
From the CAC, it was a bullish day for the banks. Credit Agricole rose by 0.77%, with Soc Gen and BNP Paribas rallying by 2.18% and by 2.50% respectively.
The French auto sector also had a bullish session. Stellantis NV rose by 2.62%, with Renault jumping by 4.58%.
Air France-KLM rose by 0.86%, while Airbus SE ended the day down by 1.16%.
On the VIX Index
It was back into the green for the VIX on Thursday, marking just a 2nd rise in 6 sessions.
Reversing a 4.29% fall from Wednesday, the VIX surged by 15.27% to end the day at 20.31.
The NASDAQ tumbled by 2.51%, with the Dow and the S&P500 seeing losses of 0.49% and 1.42% respectively.
The Day Ahead
It’s a busier day ahead on the Eurozone’s economic calendar. Finalized December inflation figures from Spain and France are due out along with trade data for the Eurozone. Barring marked revisions to the prelim figures, expect the Eurozone’s trade data to have a greater influence.
On the monetary policy front, ECB President Lagarde is also scheduled to speak. The markets will be looking for any guidance on inflation and monetary policy.
Later in the session, U.S retail sales will also be key. An unexpected slide in consumption could question the FED’s views on the economic outlook. Earlier in the day, trade data from China will set the tone.
Away from the economic calendar, U.S corporate earnings will also be a key driver. Citi, JPMorgan Chase, and Wells Fargo are scheduled to release earnings results today.
The Futures
In the futures markets, at the time of writing, the Dow Mini was up by 39 points.
For a look at all of today’s economic events, check out our economic calendar.