European Equities: A Lack of Stats Leaves Brexit in Focus

Expect a choppy day ahead as the markets focus on the UK Parliament and Brexit. A call for a general election would test the majors…
Bob Mason
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Economic Calendar:

Monday, 21st October

  • German PPI (MoM) (Sep)

Thursday, 25th October

  • French Manufacturing PMI (Oct) Prelim
  • French Services PMI (Oct) Prelim
  • German Manufacturing PMI (Oct) Prelim
  • German Services PMI (Oct) Prelim
  • Eurozone Manufacturing PMI (Oct) Prelim
  • Eurozone Markit Composite PMI (Oct) Prelim
  • Eurozone Services PMI (Oct) Prelim
  • ECB Deposit Facility Rate (Oct)
  • ECB Interest Rate Decision (Oct)

Friday, 26th October

  • GfK German Consumer Climate (Nov)
  • German Ifo Business Climate Index (Oct)

The Majors

It was a day in the red for the European majors on Friday, with the CAC40 falling by 0.65% to lead the way. The EuroStoxx600 and DAX30 saw more modest losses of 0.26% and 0.17% respectively.

Uncertainty over the outcome of the Parliamentary vote on Boris Johnson’s Brexit agreement pinned the majors back on the day.

Economic data through the week was also skewed to the negative, weighing on risk appetite on the day.

The Stats

It a quiet day on the Eurozone economic calendar on Friday. There were no stats from the Eurozone to provide the majors with direction.

While it was also a quiet session in the U.S, on the economic data front, 3rd quarter GDP numbers out of China tested the markets.

China’s economy grew by 1.5%, quarter-on-quarter, in the 3rd quarter, easing from 1.6% in the 2nd quarter. Year-on-year, the economy grew by 6.0%, which was worse than a forecast of 6.1%. In the 2nd quarter, the economy had grown by 6.1%.

The Market Movers

For the DAX: It was a mixed day for the auto sector. Volkswagen led the way rising by 1.04%, with BMW and Daimler rising by 0.87% and by 0.59% respectively. Continental bucked the trend on the day, with a 0.58% loss.

It wasn’t a mixed day for the banks, however, with Commerzbank and Deutsche Bank falling by 1.01% and by 0.41% respectively.

From the CAC, it was a non-eventful day for the banks. BNP Paribas rose by just 0.02%, while both Credit Agricole and Soc Gen ended the day flat. For the autos, it was a bearish day. While Peugeot fell by 1.66%, Renault tumbled by 11.48%, the sell-off coming off the back of a cut in the 2019 earnings forecast.

On the VIX Index

The VIX Index saw green for a 3rd consecutive day on Friday, rising by 3.43%. Following a 0.7% gain on Thursday, the VIX ended the day at 14.3.

Uncertainty over Brexit and disappointing GDP numbers out of China provided the upside on the day.

The Day Ahead

It’s a day ahead on the Eurozone economic calendar. Economic data from the Eurozone is limited to Germany’s September wholesale inflation figures.

While forecasts are EUR negative, the data is unlikely to have a material impact on the European majors.

We can expect some risk aversion, however, following the UK Parliament’s vote against Boris Johnson’s latest Brexit agreement with the EU.

Through the course of the day, it will ultimately boil down to what lies ahead. A British snap general election would be a negative for the majors, while talk of a 2nd referendum would be considered a marginally more positive scenario.

In the futures market, at the time of writing, the DAX30 was up by 23.5 points, with the Dow up by 56 points.

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