European Equities: Brexit, COVID-19, U.S Economic Data and Stimulus Talks in Focus
Friday, 16th October
Italian CPI (MoM) (Sep) Final
Eurozone Inflation (Sep) Final
Eurozone Trade Balance (Aug)
It was a particularly bearish day for the European majors on Thursday. The DAX30 slid by 2.49%, with the CAC40 and EuroStoxx600 falling by 2.11% and by 2.08% respectively.
Market sentiment towards the latest spike in new COVID-19 cases and government measures to contain the spread weighed.
In Europe, France introduced curfews, with other EU member states closing schools and canceling surgeries.
The moves come ahead of winter without a COVID-19 vaccine, with another member statewide lockdown likely to derail the Eurozone’s economic recovery.
Adding to the negative sentiment was fresh concerns over the risk of political deadlock should Biden fail to win by a landslide.
Joe Biden will need to win and win decisively for Trump to have little to no grounds to contest the results.
It was a relatively quiet day on the Eurozone economic calendar. Key stats included finalized September inflation figures from France.
The stats were in line with prelim, affirming market concerns over a pickup in deflationary pressures across the Eurozone.
In September, consumer prices fell by 0.5%, month-on-month, with the harmonized consumer price index falling by 0.6%. In August, consumer prices had fallen by 0.1%.
From the U.S
It was a busier day on the economic calendar. Key stats included October manufacturing numbers and the weekly jobless claims.
The NY Empire State Manufacturing Index slipped from 17.0 to 10.5, while the Philly FED Manufacturing Index jumped from 15.0 to 32.3.
Economists had forecasted the respective indexes to come in at 15.0 and 14.0 respectively.
While the manufacturing numbers were mixed, labor market figures disappointed. In the week ending 9th October, initial jobless claims came in at 898k.
This was up from a previous week 845k, raising further concerns over the labor market recovery.
The Market Movers
For the DAX: It was a particularly bearish day for the auto sector on Thursday. BMW and Volkswagen slid by 2.58% and by 2.83% respectively to lead the way down. Continental and Daimler saw more modest losses of 0.41% and 1.86% respectively.
It was also a bearish day for the banks. Deutsche Bank fell by 0.04%, while Commerzbank slid by 3.40%
From the CAC, it was a bearish day for the banks. BNP Paribas fell by 2.72%, with Credit Agricole and Soc Gen sliding by 3.23% and by 4.03% respectively.
It wasn’t much better for the French auto sector, with Peugeot and Renault seeing losses of 2.62% and 1.97% respectively.
Air France-KLM fell by 1.90%, while Airbus SE ended the day with a 0.58% loss.
On the VIX Index
It was the 4th consecutive day in the green for the VIX. Following a 1.27% gain on Wednesday, the VIX rose by 2.16% to end the day at 26.97.
The U.S equity markets had kicked off the day in the red. A lack of progress towards a stimulus package, disappointing economic data, and COVID-19 weighed.
From the labor market, the latest jobless claims figures provided further evidence that the labor market recovery had stalled.
On the earnings front, Morgan Stanley beat 3rd quarter estimates, while United Airlines disappointed.
The Dow and S&P500 fell by 0.07% and by 0.15% respectively, with the NASDAQ ending the day down by 0.47%. Late supported pared losses from earlier in the day, as Trump looked to progress stimulus talks.
The Day Ahead
It’s a relatively quiet day on the Eurozone economic calendar. Economic data includes finalized September inflation figures and August trade figures for the Eurozone and inflation figures for Italy.
We don’t expect too much influence from the numbers, however.
Updates on the COVID-19 stimulus bill, COVID-19 news, and Brexit will remain the key areas of focus. On the Brexit front, Boris Johnson is expected to respond to the lack of progress from the EU Summit on Thursday. A decision to pull the plug on further negotiations would rattle the markets.
From the U.S, it’s another busy day ahead on the economic calendar. Key stats include retail sales, industrial production, and prelim consumer sentiment figures.
In the futures markets, at the time of writing, the Dow was up by 19 points.
For a look at all of today’s economic events, check out our economic calendar.