European Equities: A Light Economic Calendar Leaves Geopolitics in Focus

It was a bullish end to the week, in spite of more doom and gloom from Germany. Updates on trade will continue to be the key driver today.
Bob Mason
Businessman touching stock market graph on a virtual screen display.

Economic Calendar:

Monday, 9th December 2019

  • German Trade Balance (Oct)

Tuesday, 10th December 2019

  • French Non-Farm Payrolls (QoQ) (Q3)
  • German ZEW Current Conditions (Dec)
  • German ZEW Economic Sentiment (Dec)
  • Eurozone ZEW Economic Sentiment (Dec)

Thursday, 12th December 2019

  • German CPI (MoM) (Nov) Final
  • French CPI (MoM) (Nov) Final
  • French HICP (MoM) (Nov) Final
  • Eurozone Industrial Production (MoM) (Oct)
  • ECB Deposit Facility Rate (Dec) / ECB Interest Rate Decision (Dec)
  • ECB Press Conference

Friday, 13th December 2019

  • Spanish CPI (YoY) (Nov) Final
  • Spanish HICP (YoY) (Nov) Final

The Majors

It was a bullish end to the week for the European majors, with the CAC40 rallying by 1.21% to lead the way.

The EuroStoxx600 wasn’t far behind, rising by 1.16%, while the DAX30 saw a more modest 0.86% on the day.

Upside on the day came from impressive economic data from the U.S and hopes of a phase 1 trade agreement between the U.S and China.

On Thursday, Trump spoke of the U.S and China making progress towards an agreement, which contradicted comments from earlier in the week. At the start of the week, Trump had stated a desire to delay any agreement until after the next year’s Presidential Election…

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Friday. Key stats were limited German industrial production figures for October that once again delivered more bad news.

According to Destatis, industrial production slid by 1.7% in October, following on from a 0.6% fall in September. Economists had forecast a 0.1% rise.

  • Within industry, the production of intermediate goods increased by 1%, with the production of consumer goods rising by 0.3%.
  • The production of capital goods slumped by 4.4%, however, dragging the headline figure deep into the red.
  • Production in industry, excluding energy and construction, fell by 1.7%.
  • Energy production rose by 2.3%, while production in construction fell by 2.8%.
  • Year-on-year, production slumped by 5.3%.

From the U.S,

Economic data ultimately led to the upswing on the day. Nonfarm payrolls surged by 266k in November, following a 163k rise in October. Economists had forecast a 186k rise. The numbers were significant when compared with the ADP numbers from earlier in the week that reported a 67k rise in nonfarm payrolls.

Wage growth also accelerated in the month, supporting a positive outlook for consumer spending going into the holiday season.

The Market Movers

For the DAX: It was a bullish day for the auto sector. BMW rallied by 1.15% to lead the way, with Continental up by 0.84%. Volkswagen and Daimler saw more modest gains of 0.55% and 0.19% respectively on the day.

It was a mixed day for the banks, however. Deutsche Bank rose by 0.73%, while Commerzbank fell by 0.08%.

From the CAC, it was a bullish day for the banks. Credit Agricole led the way, rising by 1.41%, with BNP Paribas up by 1.35%. Soc Gen saw a more modest 0.89% gain on the day.

Improved sentiment towards trade and positive stats from the U.S also supported the French Auto sector. Peugeot and Renault rose by 1.27% and by 0.67% respectively.

On the VIX Index

The VIX saw red for a 3rd consecutive day, sliding by 6.2% on Friday. Following a 1.89% decline on Thursday, the VIX ended the day at 13.6.

With the bulls in action, as the markets reacted to the latest labor market figures from the U.S, there was no hope for the VIX, which fell back to sub-14 levels in response to the NFP numbers.

Positive sentiment towards trade also pressured the VIX late in the week.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone are limited to trade data due out of Germany.

We can expect the DAX to respond to the numbers, which may well reflect more doom and gloom…

Trade data from China over the weekend will also test risk appetite later in the day.

Through the early part of the day, the Asian majors were on the move, responding to the U.S data from Friday. Trade data from China on the weekend, may limit any upside, however.

From the U.S, the administration stated that tariffs would go ahead as scheduled on 15th December, which will also limit any upside on the day. Any further updates on trade will likely overshadow today’s stats.

In the futures market, at the time of writing, the DAX30 down by 15 points, with the Dow down by 27 points.

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