European Equities: Brexit and Capitol Hill in Focus, with an Eye on COVID-19 Numbers

With the vaccine unlikely to be widely available until after the winter, the focus returned to near-term economic woes.

Containment measures to stem the spread of the 2^nd wave weighed on risk appetite. Any hopes of a continued economic recovery through the remainder of the year have been dashed by the latest lockdown measures.

The Stats

It was a particularly quiet day on the Eurozone economic calendar. There were no material stats from the Eurozone to provide the majors with direction.

From the U.S

It was a busier day on the economic calendar. Key stats included October retail sales and industrial production figures.

In October, core retail sales rose by just 0.2%, month-on-month, following a 1.2% jump in September. Retail sales rose by 0.3%, following a 1.6% rise in September. Economists had forecasted increases of 0.6% and 0.5% respectively.

Month-on-month, industrial production rose by 1.1%, reversing a 0.4% decline from September. Economists had forecast a 1% rise.

Other stats on the day included import and export price and business inventory numbers that the markets brushed aside.

The Market Movers

For the DAX: It was another bullish day for the auto sector on Tuesday. Continental and Daimler rose by 1.41% and by 1.66% respectively to lead the way. BMW and Volkswagen both saw more modest gains of 0.57%.

It was also a bullish day for the banks. Deutsche Bank rose by 0.19%, with Commerzbank gaining 1.12%.

From the CAC, it was another relatively bullish day for the banks, with BNP Paribas and Credit Agricole rising by 0.80% and by 0.32% respectively. Soc Gen ended the day up by 1.31%, however, to lead the way once more.

It was also another positive day for the French auto sector. Peugeot eked out a 0.03% gain, with Renault rising by 0.52%.

Air France-KLM slipped by 0.14% following Monday’s 11.71% COVID-19 vaccine fuelled surge, while Airbus SE rose by 0.10%.

On the VIX Index

It was back into the green for the VIX on Tuesday, marking just a 4^th daily gain from fourteen. Partially reversing a 2.81% fall on Monday, the VIX rose by 1.16% to end the day at 22.71.

On Tuesday, the Dow fell by 0.56%, with the NASDAQ and the S&P500 seeing losses of 0.21% and 0.48% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Finalized inflation figures for the Eurozone are due out later today.

We don’t expect the stats to have a material impact on the European majors, however.

From the U.S, building permits and housing starts for October are due out late in the session. Again, the stats are unlikely to have a material impact on the majors.

While updates from the final day of Brexit talks may influence, COVID-19 news updates remain the key driver. Across the pond, any hopes of a pre-holiday stimulus package also look slim, which will continue to test support for riskier assets. Labor market conditions remain dire and October retail sales figures disappointed on Tuesday. Without a 2^nd package, expectations are that unemployment will pick up again, which will weigh more heavily on spending. Similar threats loom large across the EU.

The Futures

In the futures markets, at the time of writing, the Dow was down by 56 points.

For a look at all of today’s economic events, check out our economic calendar.