DAX, CAC, and FTSE 100: Central Banks to Test Post China PMI Sentiment

The Majors

It was a mixed start to March for the European majors on Wednesday. The FTSE 100 rose by 0.49%, while the CAC and DAX saw losses of 0.39% and 0.46%, respectively.

Economic data from the euro area and the UK took a back seat as investors responded to private sector PMI numbers from China. The all-important Caixin Manufacturing PMI jumped from 49.2 to 51.6 in February. Economists forecasted a more modest increase to 50.2. Significantly, China’s manufacturing sector expanded for the first time since July 2022.

However, the DAX and the CAC hit reverse late in the European session. Fed Fear resurfaced during the US session, with economic indicators and Fed chatter weighing on riskier assets.

In February, the US ISM Manufacturing PMI continued reflecting sector weakness mid-way through Q1. However, sub-components of the report pointed to a pickup in inflationary pressure, weighing on riskier assets.

Hawkish Fed commentary also fueled Fed Fear, with Fed Dove Neel Kashkari open to a 50-basis point rate in March.

The NASDAQ Composite Index and the S&P 500 responded to the stats and the Kashkari comments, falling by 0.86% and 0.47%, respectively. The Dow avoided the red, eking out a 0.02% gain.

Despite the focus on the Fed, dovish BoE Governor Bailey’s commentary and the China Manufacturing PMI numbers delivered the FTSE 100 with a bullish session.

The Stats

The private sector was in the spotlight on Wednesday, with manufacturing PMI numbers from euro area member states, the Eurozone, and the UK in focus.

From the Eurozone, the PMI numbers were mixed. However, Greece, Italy, and Spain saw sharp improvements in output to offset weaker numbers from France and Germany. The Eurozone manufacturing PMI slipped from 48.8 to 48.5, unchanged from a prelim 48.5.

In contrast, the UK private sector may have turned a corner in February. The UK manufacturing PMI increased from 47.0 to 49.3, up from a prelim 49.2.

From the US

In February, the ISM Manufacturing PMI increased from 47.4 to 47.7, while the ISM Manufacturing Prices Index jumped from 44.5 to 51.3 versus a forecasted 45.1.

The Market Movers

For the DAX: It was a mixed day for the auto sector. Volkswagen fell by 0.51%. However, Continental and BMW saw gains of 1.63% and 1.41%, respectively, with Daimler rising by 0.94%.

It was a bearish day for the banks. Deutsche Bank and Commerzbank slid by 1.76% and 2.26%, respectively.

From the CAC, it was also a bearish day for the banks.  BNP Paribas slid by 4.16%, with Credit Agricole and Soc Gen ending the day with losses of 1.49% and 2.78%, respectively.

News of Belgium planning to sell its stake in BNP weighed. State-owned SFPI-FPIM reportedly plans to sell a $2.3 billion stake, weighing on bank stocks.

The French auto sector had a mixed session. Stellantis NV rallied by 3.03%, while Renault fell by 1.21%.

Air France-KLM rose by 1.30%, while Airbus SE fell by 1.37%

The Day Ahead

It’s a busy day ahead on the European economic calendar. Prelim euro area inflation and Eurozone unemployment numbers will be in focus. We expect the euro area inflation numbers to have more influence. A hotter-than-expected CPI report would pressure the DAX and the CAC ahead of the ECB monetary policy meeting minutes.

For the FTSE 100, the Bank of England will be in the driving seat, with Chief Economist Huw Pill speaking on the economic outlook. Hawkish chatter could fuel a GBP rally at the expense of the FTSE 100.

From the US, the labor market will be in focus, with initial jobless claims, unit labor costs, and nonfarm productivity in the spotlight. We expect another fall in initial jobless claims to refocus market attention on the Fed and the prospects of a more aggressive interest rate trajectory to bring inflation under control.

The Futures

Across the futures markets, the FTSE 100 was up 10.5 points, while the CAC and DAX were down 35 points and 6 points, respectively. The US futures also had a mixed morning. The NASDAQ mini was down 72.75 points, while the Dow mini was up by 36 points.

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