European Equities: A Light Economic Calendar Leaves Geopolitics in Focus

Can the rebound continue? Trump Twitter account will need to remain on the quieter side later on in the day to let the numbers do the talking…
Bob Mason
Light Board

Economic Calendar:

Friday, 9th August

  • German Trade Balance (Jun)
  • Italian CPI (MoM) (Jul) Final

The Majors

It was the day of the rebound on Thursday, as trade war tensions eased. The CAC40 led the way on the day, rallying by 2.31% to reverse losses from the 1st half of the week. For the DAX30 and EuroStoxx600, the pair rose by 1.68% and 1.66% respectively.

In spite of the Thursday rally, the DAX30 was still down by 0.23% for the current week.

A stronger Yuan and better than forecasted trade data out of China provided support for the majors on the day.

On the earnings front, Adidas failed to benefit from the rebound, with disappointing quarterly results weighing on the day. ThyssenKrupp also reported weak earnings, with the pair delivering negative outlooks.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. There were no material stats out of the Eurozone to provide direction on the day. While there were no material stats, the ECB released its Economic Bulletin on Thursday. Market focus on the U.S – China trade war muted the ECB’s economic update, however.

There were no surprises from the Bulletin, which highlighted the uncertainty in the outlook for growth attributed to rising trade tensions and risks associated with a no-deal Brexit.

Largely in line with the last ECB press conference, the bulletin also noted solid employment conditions that should support consumer spending. Consumer spending is expected to offset the negativity stemming from a manufacturing sector recession.

From the U.S, stats were on the lighter side, with the weekly jobless claims figures having a muted impact on the equity markets.

The Market Movers

From the DAX, Deutsche Bank was among the best performers on the day, rallying by 2.55%. A stronger Yuan and rising government bond yields provided much-needed support on the day. Commerzbank saw a more modest 1.01% gain on the day.

In spite of the rebound, Adidas was the worst performer on the day, sliding by 3.22% in response to the weak earnings and negative outlook. In stark contrast, ThyssenKrupp jumped by 2.07%, with the markets having expected earnings and the outlook to be on the weaker side.

From the auto sector, Continental slid by 2.29%, with BMW ending the day down by 0.4%. Daimler and Volkswagen rose by 0.33% and 0.15% respectively.

From the CAC, the banking sector found strong support from rising government bond yields and a stronger Yuan. Soc Gen led the way, rallying by 3.01%. BNP Paribas and Credit Agricole weren’t far behind with gains of 1.98% and 2.18% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Germany’s June trade figures are due out later this morning.

Following a string of disappointing stats out of Germany at the turn of the quarter, few are expecting impressive numbers. It will ultimately boil down to by how much the German trade surplus has narrowed at the end of the 2nd quarter…

Italian inflation figures due out later in the morning will be brushed aside by the majors.

From the U.S, wholesale inflation figures will also likely have a muted impact on the European majors later in the day.

While we expect Germany’s trade data to have an influence, sentiment towards the U.S – China trade war and Brexit will remain key on the day. Expect the majors to remain sensitive to the PBoC’s setting of the Yuan and any Trump tweets.

In the futures markets, at the time of writing, the DAX was up by 33 points, while the Dow Mini was down by 38 points.

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