European Equities: Brexit, Earnings, and PMIs in Focus

It’s a busy day ahead for the European majors. Private sector PMIs, corporate earnings, and Brexit are in focus. The EU needs to deliver on the extension.
Bob Mason
Financial stock market numbers and forex trading graph, business and stock market data, financial investment concept on bull and bear shapes symbols background.

Economic Calendar:

Thursday, 24th October

  • French Manufacturing PMI (Oct) Prelim
  • French Services PMI (Oct) Prelim
  • German Manufacturing PMI (Oct) Prelim
  • German Services PMI (Oct) Prelim
  • Eurozone Manufacturing PMI (Oct) Prelim
  • Eurozone Markit Composite PMI (Oct) Prelim
  • Eurozone Services PMI (Oct) Prelim
  • ECB Deposit Facility Rate (Oct)
  • ECB Interest Rate Decision (Oct)

Friday, 25th October

  • GfK German Consumer Climate (Nov)
  • German Business Expectations (Oct) / Current Assessment (Oct) / Ifo Business Climate Index (Oct)

The Majors

It was a mixed day for the European majors on Wednesday. While the DAX30 and EuroStoxx600 rose by 0.34% and 0.11% respectively, the CAC40 slipped by 0.08%.

A lack of economic data from the Eurozone left the majors in the hands of geopolitics and U.S corporate earnings.

The UK Parliament’s vote to prevent Boris Johnson’s deal from being pushed through by 31st October tested the majors on the day. With a Brexit deal in limbo and the British PM looking for a general election to deliver Brexit, it was all eyes on the EU to approve the extension request.

The Stats

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

It was also a quiet day on the U.S economic calendar, leaving the majors exposed to geopolitical risk and U.S corporate earnings.

While it was a quiet day on the economic calendar, it was a busier day on the U.S corporate earnings calendar. Boeing, Caterpillar, Ford Motor, Microsoft and Tesla were scheduled to release earnings later in the day.

Disappointing results from Caterpillar and Boeing tested the majors late in the session, with Texas Instrument Inc. doing the majors few favors following a negative forecast announcement late on Tuesday.

While the numbers were negative, hopes of a resolution to the ongoing U.S – China trade war buffered the impact on the majors.

The Market Movers

For the DAX: It was a positive day for the auto sector. Daimler and Volkswagen led the way with gains of 2.03% and 1.04% respectively. BMW and Continental saw more modest gains of 0.75% and 0.08% respectively.

Bank stocks also found support, with Commerzbank and Deutsche Bank rising by 0.61% and 0.83% respectively.

From the CAC, it was a relatively non-eventful day for the banks. BNP Paribas and Soc Gen rose by 0.28% and 0.13% respectively, while Credit Agricole ended the day flat. For the autos, it was a mixed day. While Peugeot rallied by 3.24%, Renault fell by 0.04%, with pressure continuing to come from its negative forecast. For Peugeot, while there’s doom and gloom surrounding the auto sector, a strong 3rd quarter earnings delivered the upside.

On the VIX Index

The VIX Index saw red on Wednesday, falling by 3.11%. Reversing a 3.29% gain from Tuesday, the VIX ended the day at 14.0.

While uncertainty over Brexit was positive for the VIX, a rebound in the U.S majors pressured the VIX late in the day. In spite of U.S corporate earnings being mixed on the day, hopes of a resolution to the U.S – China trade war muted the effects of any negativity.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. October prelim private sector PMIs are due out of France, Germany, and the Eurozone.

While Germany’s manufacturing sector PMI will continue to have the greatest impact, the Eurozone’s composite will also garner plenty of interest.

The markets will be looking for service sector activity to continue to provide support.

From the U.S, October private sector PMIs and September durable goods orders will also influence later this afternoon.

On the earnings front. Daimler, and Intel corporate earnings are in focus later that will influence risk sentiment.

Geopolitics will also provide direction. With the EU expected to approve Britain’s extension request on Brexit, it will boil down to whether Johnson gets his way and Britain goes to the polls. There is one small matter of the length of the Brexit extension to also consider.

In the futures market, at the time of writing, the DAX30 was up by 7.5 points, with the Dow up by 8 points.

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