European Equities: Barring Trade Woes, Economic Data to Drive the Majors

European and U.S stats to drive the majors today, assuming that there are no negative comments from the U.S on trade…
Bob Mason
Global financial markets

Economic Calendar:

Friday, 5th December 2019

  • German Industrial Production (MoM) (Oct)

The Majors

It was a mixed day for the European majors on Thursday. The CAC40 bucked the trend on the day, eking out a 0.03% gain. It was bearish for the DAC30 and EuroStoxx600, however, which fell by 0.65% and by 0.13% respectively.

There was conflicting news on trade once more. While there were reports of the U.S and China inching closer to a phase 1 agreement, Trump had said that he may wait until after next year’s presidential election.

Uncertainty on the trade front and disappointing economic data out of Germany and the Eurozone pressured the majors on the day.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Thursday. Key stats included the Eurozone’s 3rd quarter finalized GDP numbers and October retail sales figures. In the early part of the day, German factory order figures for October also provided direction.

While GDP numbers were in line with 2nd estimates, factory orders and retail sales figures pressured the majors on the day.

According to Destatis, German factory orders fell by 0.4% in October, partially reversing a revised 1.5% increase in September. Economists had forecast a 0.3% rise.

  • Domestic orders slid by 3.2%, while foreign orders rose by 1.5%, month-on-month.
  • New orders from the Eurozone jumped by 11.1%, while new orders from other countries slid by 4.1%.
  • Orders for intermediate goods increased by 0.7%, with orders for consumer goods rising by 0.3%.
  • Manufacturers reported that orders for capital goods slid by 1.1%, however.
  • Year-on-year, factory orders fell by 5.5%.

From the Eurozone, retail sales fell by 0.6% in October, following on from a 0.2% decline in September. Economists had forecast a 0.3% decline.

According to Eurostat,

  • Non-food product sales fell by 1.1%, while food, drinks and tobacco sales increased by 0.3%
  • Automotive fuel sales rose by 0.6%.
  • By member state, Germany and Ireland reported the largest fall in sales, both sliding by 1.9%.
  • Portugal reported the largest increase, with a 2.1% jump in sales.
  • Year-on-year, sales increased by 1.4%, with Malta reporting a 5.1% jump in sales.

From the U.S,

From the U.S, economic data failed to provide support in spite of positive numbers. The trade deficit narrowed, jobless claims fell to a 7-month low and factory orders were on the rise.

The Market Movers

For the DAX: It was a mixed day for the auto sector. BMW and Volkswagen rose by 0.19% and by 0.08% respectively. Continental and Daimler fell by 0.56% and by 0.67% respectively.

It was also a mixed day for the banks. Deutsche Bank fell by 0.42%, while Commerzbank rose by 0.81%.

From the CAC, it was a mixed day for the banks. Soc Gen led the way, rising by 0.83%, with Credit Agricole up by 0.32%. BNP Paribas bucked the trend, falling by 0.06%.

Mixed sentiment towards trade weighed on the French Auto sector, however. Peugeot and Renault fell by 1.03% and by 1.85% respectively.

On the VIX Index

The VIX saw red for a 2nd consecutive day, falling by 1.89% on Thursday. Following on from a 7.27% slide from Wednesday, the VIX ended the day at 14.5.

The 2nd day in the red came as the U.S equity markets recovered losses from earlier in the day.

Trade continued to be the main area of focus, with the markets expecting the U.S to hold back from rolling out tariffs on 15th December.

On the data front, positive jobless claims figures in the wake of Wednesday’s ADP nonfarm employment change figures were also negative for the VIX.

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 industrial production figures due out of Germany.

While we can expect the numbers to provide direction, trade noise will likely continue to overshadow the stats.

From the U.S, we can certainly expect some impact, with nonfarm payrolls, unemployment figures and wage growth numbers due out.

Anything close to the ADP numbers from Wednesday and expect risk appetite to take a hit.

Late in the European session, prelim Michigan consumer sentiment and expectation figures are also due out. Barring any major moves, however, the impact will likely be limited.

In the futures market, at the time of writing, the DAX30 was up by 31.5 points, with the Dow up by 36 points.

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