European Equities: A Quiet Calendar Leaves Geopolitics in Focus

With no material stats to provide direction, geopolitics will be the key driver on the day. Updates from the weekend will set the tone…
Bob Mason
Global financial markets

Economic Calendar:

Monday, 18th November 2019

  • ECB Financial Stability Review

Wednesday, 20th November 2019

  • German PPI (MoM) (Oct)

Thursday, 21st November 2019

  • ECB Monetary Policy Meeting Minutes

Friday, 22nd November 2019

  • German GDP (YoY) (Q3) 2nd Estimate
  • German GDP (QoQ) (Q3) 2nd Estimate
  • French Manufacturing PMI (Nov) Prelim
  • French Services PMI (Nov) Prelim
  • German Manufacturing PMI (Nov) Prelim
  • German Services PMI (Nov) Prelim
  • Eurozone Manufacturing PMI (Nov) Prelim
  • Eurozone Markit Composite PMI (Nov) Prelim
  • Eurozone Services PMI (Nov) Prelim

The Majors

The European majors ended the week on a high note last week, with the CAC40 rising by 0.65% to lead the way. For the DAX30 and EuroStoxx600, the pair saw more modest gains of 0.47% and 0.06% respectively.

The trade war pendulum swung back in favor of the bulls at the end of the week, supporting the upside on the day.

News from the U.S administration of the U.S and China edging closer to a phase 1 agreement provided the support on the day.

White House economic advisor Kudlow had spoken on Thursday, saying that they were getting close to a phase 1 agreement. The news was in contrast, however, to reports from China, where Beijing continued to call for a removal of the existing tariffs.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Friday. Key stats included finalized October inflation figures out of Italy and the Eurozone and the Eurozone’s trade figures for September.

On the inflation front, inflation figures out of Italy and the Eurozone had a muted impact on the majors.

Month-on-month, Italian consumer prices fell by 0.1% in October, according to finalized figures. In October, consumer prices had fallen by 0.6%. This was worse than prelim figures, however, where consumer prices were estimated to have remained flat in the month.

From the Eurozone, it was a positive day for the majors, on the economic data front. Inflationary pressures eased, with the Eurozone’s trade surplus widening in September. The key driver, on the data front, was trade data on the day.

According to Eurostat,

  • The Eurozone’s trade surplus widened from €14.7bn to €18.7bn in September..
  • Exports of goods to the rest of the world rose by 5.2%, year-on-year, to €196.2bn
  • Imports of goods from the rest of the world rose by just 2.1% to €177.6bn.
  • Intra-euro area trade rose to €163.4bn in September, up by 0.9% year-on-year.

From the U.S, disappointing retail sales figures failed to pin back the European majors as the equity markets responded to the U.S administration chatter on trade.

The Market Movers

For the DAX: It was a mixed day for the auto sector, as the markets responded to positive U.S chatter on trade. BMW and Volkswagen led the way, rising by 1.71% and 1.60% respectively. Continental was close behind, rising by 1.19%. Daimler continued to see red, however, following the week’s negative outlook. As the DAX’s worse performer on the day, Daimler slid by 1.18%.

It was positive for the banks, however. Deutsche Bank rose by 0.83%, with Commerzbank rising by 0.15%.

From the CAC, bank stocks found further support at the end of the week. Soc Gen and BNP Paribas led the way, rising by 0.90% and by 0.58% respectively. Credit Agricole rose by a more modest 0.44%.

Autos also found support with Peugeot and Renault rising by 0.68% and by 0.52% respectively.

On the VIX Index

It was a day in the red on Friday, with the VIX falling by 7.66%. Reversing a 0.38% gain from Thursday, the VIX ended the day at $12.1.

Equity market reaction to positive chatter from the U.S on progress towards a China – U.S trade agreement weighed.

The Day Ahead

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

While there are no stats, the ECB is due to release its Financial Stability Report, which will draw interest.

A lack of stats will leave the majors in the hands of risk sentiment throughout the day. Geopolitics remains the key driver, with updates from the U.S and Beijing on trade talks in focus.

From the UK, the general election opinion polls and projections will also influence…

In the futures market, at the time of writing, the Dow down by 8 points.

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