European Equities: A Fall in China Imports Will Test Sentiment ahead of EarningsA larger than expected slide in China imports raised a red flag for the European majors. Earnings will need to impress through the day…
Friday, 12th April 2019
- Spanish CPI (YoY) (Mar) Final
- Spanish HICP (YoY) (Mar) Final
- Eurozone Industrial Production m/m (Feb)
It was a 2nd consecutive day in the green for the European majors on Thursday. Leading the way on the day was the CAC40, which rose by 0.66%. The DAX and EuroStoxx600 saw more modest gains, rising by 0.25% and by 0.06% respectively.
While both the DAX and EuroStoxx600 remained in negative territory for the current week, Thursday’s gains led to the CAC moving into positive territory, up by 0.17%.
Through to Thursday’s close, only the ASX200 and NASDAQ were in positive territory for the current week, across the major bourses.
Economic data released through the European session on Thursday was on the lighter side. Key stats included finalized inflation figures out of France and Germany. Released ahead of the European open, the in-line with prelim figures had a muted impact on sentiment towards monetary policy and the EUR.
Support through the day came from Wednesday’s dovish ECB press conference, any monetary policy tightening now off the table for the foreseeable future.
On the DAX, Deutsche Bank and Volkswagen were amongst the leading stocks, up by 2.49% and by 1.95% respectively. Commerzbank also found strong support, rallying by 3.06%.
Elsewhere, while BNP Paribas gained 1.37%, the headline story from the CAC40 was better than expected earnings results for LVMH. LVMH ended the day up 4.61%
A 0.19% fall in the EUR against the greenback on the day provided further support ahead of a key earnings season for the markets.
The Day Ahead
Economic data due out of the Eurozone includes finalized inflation figures out of Spain and February industrial production figures for the Eurozone.
While forecasts are for industrial production to fall by 0.5% in February, better than expected production figures out of France, Germany, and Italy suggest that the numbers could be better than forecasts.
Direction through the day will ultimately boil down to this morning’s trade figures out of China and earnings later in the day.
China’s trade figures were mixed for the European majors. A 14.2% jump in exports reversed most of February’s 20.8% decline. Imports did slide by 7.6%, however, which will be of some concern. Weak demand is considered negative for European multinationals.
On the earnings front, JPMorgan Chase and Wells Fargo release their earnings later today, which will influence financial stocks.
The good news for the European equity markets was luxury brand LVMH’s earnings results on Thursday. There’s been plenty of concern over weaker demand from China and a slowdown in the global economy.
Strong earnings from LVMH will deliver some relief, though there’s a long way to go. The IMF revised down growth forecasts for this year, the ECB has reverted back to a dovish stance and the FED has hit pause.
While accommodative monetary policy is positive for riskier assets, the earnings outlook would need to remain upbeat to support current levels.
At the time of writing, the futures pointed to a mixed open. The DAX30 was down 17points, with the CAC40 pointing to a 2 point loss at the open.