European Equities: A Lack of Stats Leaves Geopolitics and Monetary Policy in Focus

A lack of stats leaves the markets to focus on FED Chair Powell’s testimony to Congress tomorrow and geopolitical risk, which could test the majors.
Bob Mason
List of stock market indices

Economic Calendar:

Thursday, 11th July

  • German CPI (MoM) (Jun) Final
  • French CPI (MoM) (Jun) Final
  • French HICP (MoM) (Jun) Final
  • ECB Monetary Policy Meeting Minutes

Friday, 12th July

  • Spanish CPI (YoY) (Jun) Final
  • Spanish HICP (YoY) (Jun) Final
  • Eurozone Industrial Production (MoM) (May)

The Majors

The majors saw red on Monday. Following on from Friday’s pullback, the DAX ended the day down by 0.2%. While the CAC slipped by just 0.08%, the EuroStoxx600 led the way down, falling by 0.21%.

In the U.S, things were not much better with the NASDAQ falling by 0.78% on the day. The Dow and S&P500 also saw red, falling by 0.43% and 0.48% respectively.

The Stats

Economic data out of the Eurozone was on the lighter side on the day.

German industrial production and trade figures for May provided direction going into the market open.

Industrial production rose by 0.3% in May, month-on-month, partially reversing a revised 2.0% slide in April. Economists had forecast a 0.4% rise.

According to figures released by Destatis,

  • In May, production in industry excl. energy and construction was up by 0.9%.
  • By industry, the production of intermediate goods fell by 0.5%, while the production of capital goods rose by 2.0%. Production of consumer goods was also on the up, rising by 1.1%.
  • Outside of industry, energy production and production in construction fell by 2.2% and by 2.4% respectively.
  • Year-on-year, industrial production was down by 3.7%, which was the telling blow.

The trade surplus widened from €17.0bn to €18.7bn in May. Economists forecasted for the trade surplus to hold steady at €17.0bn

According to the figures released by Destatis,

  • Exports rose by 1.1%, month-on-month and by 4.5% year-on-year.
  • Imports fell by 0.5%, month-on-month, while up by 4.9% year-on-year.

There were no material stats out of the U.S to influence the majors on the day.

On the monetary policy front, last week’s U.S nonfarm payroll figures continued to raise doubts over a FED rate cut later in the month.

The markets will need to wait until tomorrow, where FED Chair Powell will deliver testimony to Congress. Powell is scheduled to speak later today but may hold back on any chatter on policy ahead of Wednesday’s testimony.

Ahead of the European open, the Asian majors saw red to set the tone on the day.

The Market Movers

From the DAX, Deutsche Bank led the way down on the day, sliding by 5.9%. The bank’s restructuring plans did the damage on the day, as the markets responded to the bank’s decision to move away from core businesses.

Commerzbank Joined Deutsche in the red, sliding by 3.57% as the banking sector came under fire at the start of the week.

Things were not much better for the auto sector. While Volkswagen ended a 2nd consecutive day unchanged, the rest were in the red.

Daimler saw the heaviest losses, falling by 1.46%. Continental and BMW ended the day down by 0.76% and by 0.87% respectively.

From the CAC, BNP Paribas fell by 1%, with Credit Agricole ending the day down by 1.39%. Renault also saw red, falling by 1.9%.

The Day Ahead

It’s a quiet day ahead, with no material stats due out of the Eurozone.

The lack of stats will leave market sentiment towards FED and ECB monetary policy to provide direction ahead of FED Chair Powell’s testimony to Congress tomorrow.

While the focus is on tomorrow’s testimony, it remains to be seen whether Powell will provide the markets with any forward guidance in a scheduled speech later today. The FED Chair is due to speak on stress testing at the Federal Reserve Board Conference.

Ahead of the European open, it was a mixed start to the day in the Asian markets, with the Nikkei up by 0.61%, while the ASX200 was down by 0.1%.

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