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Economic Calendar:

Thursday, 23rd January 2020

ECB Monetary Policy Decision and Press Conference

Eurozone Consumer Confidence Prelim

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Friday, 24th January 2020

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

German IFO Business Climate Index

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

ECB President Lagarde Speaks


The Majors

It was a mixed day for the European majors on Tuesday, with the CAC40 and EuroStoxx600 falling by 0.54% and by 0.14% respectively. The DAX30 bucked the trend on the day, rising by 0.05%.

Economic data provided limited support on the day, as the markets reacted to some alarming news over the Coronavirus that took yet another victim and reached new shores.

An affirmation of person to person transfer of the virus also raised the chances of a SARS repeat that punished the Asian markets back in 2003.

Airline, hotel and other tourism-related stocks will likely struggle near-term and could slide into the abyss should China fail to contain the spread.

China hits planes, trains, and automobiles on Friday, as millions travel across the globe for the Chinese NY. With the virus now detected in Beijing, Shanghai, and Shenzhen, the prospects of a global outbreak spiked on Tuesday.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Tuesday. Key stats included the ZEW economic sentiment figures out of Germany and the Eurozone for January.

While the majors saw red on the day, the sentiment numbers were positive.

Germany’s ZEW economic sentiment index rose from 10.70 to 26.70, with the Eurozone’s sentiment index rising from 11.20 to 25.6. Both sets of numbers came in well ahead of forecasts.

While the impact on the majors was muted, it is worth noting that Germany’s Sentiment Index hit levels not seen since 2015.

The upside was attributed to the phase 1 trade agreement between the U.S and China. Any hint of tariffs on Germany and expect a reversal…

From the U.S, there were no major stats to provide direction on the day, though even U.S numbers would have had a muted impact on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector. Continental tumbled by 2.65%, with Daimler and Volkswagen falling by 1.39% and by 1.14% respectively.

It was a mixed day for the banks, however, with Commerzbank falling by 0.54%, while Deutsche Bank gained 0.30% on the day.

Lufthansa was the worse performer on the day, sliding by 4.25%.

From the CAC, it was also a bearish day for the banks. BNP Paribas fell by 0.55%, with Credit Agricole and Soc Gen down by 0.35% and by 0.52% respectively.

Things were not much better for the French auto sector, with Peugeot and Renault falling by 1.21% and by 0.78% respectively.

On the VIX Index

Market jitters over the spread of the Coronavirus provided the VIX with support on Tuesday. After a 1.79% fall on Friday, the VIX rose by 6.20% on Tuesday.

The Day Ahead

It’s a particularly quiet day on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide direction to the majors.

While chatter from Davos will influence, virology remains the key area of focus. A lot can happen in  matter of hours. Expect any new cases in new geographies to weigh on risk appetite.

SARS was largely confined to Asia, this one could become a Spanish flu event. A lot of unknowns remain, including the incubation period. When considering the fact it has already spread to the U.S, the outbreak could have started well before initial reports were made.

Ahead of the European open, the Asian markets managed to avoid another pullback though the markets remain susceptible to the news wires.

In the futures markets, at the time of writing, the DAX was up by 17.5 points, with the Dow up by 24 points.

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