European Equities: A Catalyst is Going to be Needed for another High…It could be a testy day ahead. The coronavirus numbers will need to show a further easing in the rate of infection and there’s Eurozone stats in focus.
Wednesday, 12th February 2020
Eurozone Industrial Production (MoM) (Dec)
Thursday, 13th February 2020
German CPI (MoM) (Jan) Final
Friday, 14th February 2020
German GDP (QoQ) (Q4) 1st Estimate
German GDP (YoY) (Q4) 1st Estimate
Spanish CPI (YoY) (Jan) Final
Spanish HICP (YoY) (Jan) Final
Eurozone GDP (QoQ) (Q4) 2nd Estimate
Eurozone GDP (YoY) (Q4) 2nd Estimate
Eurozone Trade Balance (Dec)
It was a bullish day for the European majors on Tuesday, with a pickup in risk appetite reversing losses from the start of the week.
The DAX30 led the way, rising by 0.99%, with the EuroStoxx600 and CAC40 gaining 0.90% and 0.65% respectively. Tuesday’s gains led the EuroStoxx600 to a fresh all-time high on the day.
Sentiment had shifted ahead of the European open, with the Asian majors on the up as China returned to work following the extended break.
Fears of a wider spread of the coronavirus outside of China eased on the day, as the rate of infection slowed according to Monday’s figures.
The markets are now expecting a sizeable stimulus package to offset the effects of the outbreak on the Chinese economy.
It was another particularly quiet day on the Eurozone economic calendar on Tuesday. There were no material stats to provide direction on the day.
From the U.S, economic data was limited to JOLTs job openings for December that had a muted impact on the European majors.
On the U.S economy, FED Chair Powell delivered his first of two days of testimony to Congress.
The FED Chair stated that the FED is closely monitoring the coronavirus and its effect on China’s economy and knock-on effects on global growth. Powell added that the U.S economy seemed resilient to global headwinds at present.
On the monetary policy front, Powell stated that the FED would stand pat should economic indicators support the resilient outlook.
The Market Movers
For the DAX: It was another mixed day for the auto sector. Daimler bucked the trend, falling by 0.92%. BMW and Continental rose by 0.49% and by 0.12% respectively, while Volkswagen rallied by 1.45% on the day.
Daimler saw red in response to its earnings release. Daimler announced a net loss of €11m for the 4th quarter, down from a net profit of €1.64bn from the 4th quarter of 2018. In a bid to preserve cash, Daimler also cut its dividend from €3.25 per share to €0.90 per share…
The results came off the back of news going into the week of the firm planning to cut up to 15,000 of its workforce.
It was a bullish day for the banks, however. Commerzbank rose by 1.16%, while Deutsche Bank rallied by 2.44% on the day.
Deutsche Lufthansa was amongst the top performers on the DAX, rallying by 2.54%.
From the CAC, it was also a bullish day for the banks. BNP Paribas led the way, rising by 2.11%, with Credit Agricole and Soc Gen up by 0.71% and by 0.83% respectively.
It was a mixed day for the French auto sector, however. Peugeot rose by 1.16%, while Renault fell by 0.70%.
Air France-KLM joined Lufthansa with a 4.93% rally on the day.
On the VIX Index
The VIX rose by 0.93% on Tuesday. Partially reversing a 2.78% fall from the previous day, the VIX ended the day at 15.2.
The upside came in spite of market fears of a widespread coronavirus pandemic abating off the back of the latest numbers. From China, the latest figures showed that the rate of infection had eased going into the week.
In reality, the spread continued beyond China’s borders, with FED Chair Powell also cautious over the possible impact of the virus on economic growth.
The Day Ahead
It’s a relatively quiet day ahead on the Eurozone economic calendar. The Eurozone’s industrial production figures for December are due out later today.
Following some particularly disappointing numbers out of France, Germany, and Italy, there’s unlikely to be too much support from today’s numbers.
From the U.S, FED Chair Powell will deliver his 2nd day of testimony. Following Tuesday’s testimony, any surprises would have to come from the Q&A.
Following Tuesday’s upward swing, updates on the coronavirus will need to continue to show a slower pace of infection to ease market jitters further…
In the futures markets, at the time of writing, the DAX was down by 31.5 points, while the Dow was up by 26 points.