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European Equities: Brexit, Capitol Hill, and Economic Data in Focus

By:
Bob Mason
Published: Dec 7, 2020, 23:22 UTC

Economic data from Germany and the Eurozone will provide direction, though much will depend on Brexit news and chatter from Capitol Hill.

Depositphotos_35711349_s-2019

In this article:

Economic Calendar:

Tuesday, 8th December

French Non-Farm Payrolls (QoQ) (Q3)

German ZEW Current Conditions (Dec)

German ZEW Economic Sentiment (Dec)

Eurozone GDP (QoQ) (Q3) Final

Eurozone GDP (YoY) (Q3) Final

Eurozone ZEW Economic Sentiment (Dec)

Wednesday, 9th December

German Trade Balance (Oct)

Thursday, 10th December

Deposit Facility Rate (Dec)

ECB Marginal Lending Facility

ECB Interest Rate Decision (Dec)

Friday, 11th December

German CPI (MoM) (Nov) Final

Spanish CPI (YoY) (Nov) Final

Spanish HICP (YoY) (Nov) Final

The Majors

It was a bearish start to the week for the European majors on Monday. The CAC40 fell by 0.64%, with the DAX30 and EuroStoxx600 seeing losses of 0.21% and 0.30% respectively.

Positive economic data from Germany failed to support riskier assets, with economic data from China also failing to support.

Negative updates from Brexit talks weighed on the majors through the European session.

The world’s 6th largest economy is on the brink of crashing out of the EU without a deal. Britain also faces the prospect of WTO trade terms with the U.S.

While Brexit news was certainly negative, rising tensions between the U.S and China added to the market angst.

On Monday, news hit the wires of the U.S preparing to roll out sanctions on Chinese officials over their involvement in anti-democratic moves on Hong Kong.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. German industrial order figures were in focus.

In October, industrial production rose by 3.2% following a 1.6% increase in September. Economists had forecast a 2.7% rise.

According to Destatis,

  • Compared with February 2020, production was 4.9% lower.
  • Production in the automotive industry jumped by 9.9% on the previous month, while down by 6% since February 2020.
  • In October 2020, production in industry excluding energy and construction was up 3.3%.
  • Within industry, the production of intermediate goods increased by 4%, with the production of capital goods rising by 5.2%.
  • The production of consumer goods fell by 2.4%, however.
  • Outside industry, energy production was up by 4.0%, with the production of construction rising by 1.6%.
  • Compared with October 2019, industrial production was down by 3%.

From the U.S

It was a particularly quiet day on the economic data front, with no material stats to provide the majors with direction.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Monday. BMW and Continental fell by 1.64% and by 1.84% respectively. Daimler and Volkswagen saw more modest losses of 0.86% and 0.76% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank declined by 1.50% and 2.24% respectively.

From the CAC, French banks also struggled. BNP Paribas and Soc Gen fell by 2.70% and by 2.73% respectively, with Credit Agricole sliding by 2.90%.

It was a relatively bearish day for the French auto sector. Peugeot and Renault ended the day with modest losses of 0.82% and 0.13% respectively.

Air France-KLM bucked the trend, gaining 1.48%, while Airbus SE ending the day down by 1.07%.

On the VIX Index

It was back into the green for the VIX on Monday. Reversing a 2.3% decline from Friday, the VIX rose by 2.45% to end the day at 21.3.

The market reaction towards the U.S government’s plans to roll out sanctions on Chinese officials weighed on riskier assets early in the U.S session.

A continued rise in new COVID-19 cases and reintroduction of containment measures in U.S states added to the negative sentiment.

The Dow and S&P500 fell by 0.49% and by 0.19% respectively, while the NASDAQ gained 0.45%.

VIX 081220 Daily Chart

The Day Ahead

It’s a busy day ahead on the economic calendar. German and Eurozone ZEW Economic Sentiment figures for December are due out early in the European session.

3rd quarter GDP numbers for the Eurozone and nonfarm payroll figures from France are also due out. We would expect the GDP and payroll figures to have a muted impact on the majors, however.

From the U.S, nonfarm productivity and unit labor cost numbers for the 3rd quarter are due out. We would also expect these figures to have a muted impact on the European majors.

Away from the economic calendar, Brexit, COVID-19 news, and chatter from Capitol Hill will remain key drivers.

Overnight, British PM Boris Johnson and EU President Ursula von der Leyen held a call to attempt to break the Brexit deadlock.

The British PM reportedly agreed to drop sections of the internal market bill clauses if a deal is agreed. Johnson is now due to travel to Brussels for further talks with the EU President.

The markets would likely come under further pressure should no progress be made between now and Thursday’s EU Summit.

The Futures

In the futures markets, at the time of writing, the Dow was down by 61 points.

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

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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