European Equities: A Light Economic Calendar Leaves Geopolitics in Focus

It’s a big day ahead on the geopolitical front. Progress on Brexit and U.S – China trade talks will be needed to support the majors.
Bob Mason
Businessman touching stock market graph on a virtual screen display.

Economic Calendar:

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was a 2nd consecutive day in the green for the majors on Thursday, with the CAC40 rallying by 1.27% to lead the way. The DAX30 and EuroStoxx600 saw more modest gains of 0.58% and 0.65% respectively.

Geopolitics provided support on the day, with news of U.S – China trade talks going into a 2nd day and progress on Brexit supporting the majors.

From Washington, news of Trump planning to meet with China’s Vice Premier He was taken as a positive. On the Brexit front, Johnson and Varadkar also provided support, stating that they see a way to a Brexit deal.

The Stats

It a relatively quiet day on the Eurozone economic calendar on Thursday. Economic data was limited to German trade data for August, which pegged back the DAX30 on the day.

Germany’s trade surplus narrowed from €20.5bn to €18.1bn in August. Economists had forecast a narrowing to €19.4bn.

According to Destatis,

  • Exports fell by 1.8% from the previous month and by 3.9% from the same month a year earlier.
  • Compared with August 2018, exports to the EU fell by 3.3%.
  • Exports to the Eurozone rose by 3.7% in August.
  • Compared with August 2018, the exports of goods to non-EU countries fell by 4.8%
  • Imports rose by 0.5% from the previous month, while falling by 3.1% on the same month a year earlier.
  • Compared with the previous year, imports from the EU fell by 2.7%, while imports from the Eurozone fell by 3.8%.
  • The imports of goods from non-EU countries fell by 3.6%, compared with August 2018.

From the U.S, softer inflation figures had a muted impact on the majors as the markets responded to positive news from Washington and Britain.

The Market Movers

For the DAX: There was further support for the auto sector, with Volkswagen rallying by 2.56% to lead the way. Daimler and BMW weren’t far behind, with gains of 1.92% and 1.09% respectively. Continental trailed with a 0.34% gain. While trade data was negative for the sector, positive updates on trade talks delivered the boost.

Bank stocks also found support, with Deutsche Bank rallying by 2.41% and Commerzbank by 3.85%

From the CAC, it was also a positive day for the banks. Soc Gen led the way, rallying by 3.32%. BNP Paribas and Credit Agricole weren’t far behind, with gains of 2.82% and 2.34% respectively. For the autos, Renault rose by 0.59%, while Peugeot surged by 3.48%.

LVMH led the way on the day, with a 5.56% gain, supported by strong 3rd quarter earnings results.

On the VIX Index

The VIX Index saw red once more on Thursday, falling by 5.74%. Following on from an 8.09% fall on Wednesday, the VIX ended the day at 17.6.

Positive updates from Washington on trade talks ultimately left the VIX in the red at the day end. Hopes of progress on Brexit negotiations also eased market jitters on the day.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Finalized September inflation figures are due out of Germany, France, and Spain.

We expect the stats to have a muted impact on the majors, however, with the Brexit and U.S – China trade talks to remain the key drivers.

From the U.S, import and export price index figures will also have a muted impact, while prelim October consumer sentiment figures will have some influence.

In the futures market, at the time of writing, the DAX30 was down by 2 points, while the Dow was up by 45 points.

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