European Equities: Futures Point Northwards with Geopolitics in Focus

The Majors

It was a bearish day for the European majors on Tuesday. The DAX30 fell by 0.91%, with the CAC40 and EuroStoxx600 seeing losses of 0.64% and 0.55% respectively.

Economic data, COVID-19 updates, and a continued impasse on Capitol Hill weighed on the majors.

On the political front, the ZEW survey for Germany reflected a lack of progress towards a Brexit deal and jitters over the U.S Presidential Election. The sentiment indicator fell by more than expected in October.

While there were plenty of negatives, it wasn’t all doom and gloom.

In the IMF’s Global Financial Stability Report, the IMF projects the global economy to grow by 5.2% in 2021. While positive, the IMF did note, however, that the outlook remains highly uncertain, with vulnerabilities rising.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. Germany and the Eurozone’s ZEW Economic Sentiment figures for October were in focus.

Germany’s finalized inflation figures had a muted impact on the day.

In October, Germany’s Economic Sentiment indicator fell from 77.4 to 56.1. By contrast, the current conditions indicator rose from -66.2 to –59.5. Economists had forecast the sentiment indicator and current conditions indicator to come in at 73.0 and -60.0.

For the Eurozone, the Economic Sentiment Indicator fell from 73.9 to 52.3. Economists had forecast a fall to 72.0.

From Germany, consumer prices fell by 0.2%, which was in line with prelim figures. In August, consumer prices had fallen by 0.1%.

According to Destatis,

• Compared with August 2020, energy prices fell by 0.7%, with the prices of goods declining by 0.3%.
• Prices paid for clothing and footwear jumped by 5.6% and by 3.6% respectively.
• Consumer prices also fell by 0.2% compared with the same month a year earlier.

From the U.S

September inflation figures had a muted impact on the majors. The annual core rate of inflation held steady at 1.7%. In September, core consumer prices rose by just 0.2%. In August, core consumer prices had risen by 0.4%.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. Continental slid by 2.15%, with BMW and Daimler seeing losses of 1.48% and 1.00% respectively. Volkswagen ended the day down by just 0.76%.

It was also a bearish day for the banks. Deutsche Bank fell by 1.78%, with Commerzbank sliding by 4.40%.

From the CAC, it was a particularly bearish day for the banks. BNP Paribas slid by 4.07%, with Credit Agricole and Soc Gen falling by 3.79% and 3.95% respectively.

It wasn’t much better for the French auto sector. Peugeot and Renault ended the day with losses of 2.06% and 2.61% respectively.

Air France-KLM slid by 4.31%, with Airbus SE declining by 3.50%.

On the VIX Index

It was a 2^nd consecutive day in the green for the VIX. Following a 0.28% gain on Monday, the VIX rose by 3.99% to end the day at 26.07.

A negative market reaction towards the news of Johnson & Johnson pausing clinical trials of its COVID-19 vaccine weighed. Following J&J’s announcement, Eli Lilly announced on Tuesday that it would also be pausing its coronavirus antibody treatment trial.

A continued deadlock on Capitol Hill didn’t help, as Congress failed to make progress on the COVID-19 relief Bill.

Earnings were also in focus. While JPMorgan and Citigroup delivered better than expected results, Delta reported a slump in revenue.

The Dow and S&P500 fell by 0.55% and by 0.63% respectively, with the NASDAQ ending the day down by 0.10%.

The Day Ahead

It’s a relatively busy day on the Eurozone economic calendar.

Key stats include finalized inflation figures for Spain and August industrial production figures for the Eurozone.

Following disappointing numbers out of Germany, a pickup in production would provide the broader market with support.

Inflation figures from Spain should have a muted impact on the majors, however.

From the U.S, September’s wholesale inflation figures will garner some interest. Softer wholesale inflationary pressures would raise further concerns over the economic recovery.

Away from the economic calendar, Brexit and U.S politics will continue to influence. Any further COVID-19 news updates will also draw interest.

On the corporate earnings front, Bank of America, Goldman Sachs, United Airlines, and Wells Fargo are in focus from the U.S.

The Futures

In the futures markets, at the time of writing, the Dow was up by 36 points, with the DAX up by 21 points.

For a look at all of today’s economic events, check out our economic calendar.