European Equities: Brexit, Earnings and Stats to Influence
Friday, 25th October
- GfK German Consumer Climate (Nov)
- German Business Expectations / Current Assessment / Ifo Business Climate Index (Oct)
It was a 4th consecutive day in the green for DAX30 and EuroStoxx600 on Thursday, with the CAC40 reversing a Wednesday pullback.
The EuroStoxx600 led the way, rising by 0.59%, with the DAX30 and CAC40 up by 0.58% and by 0.55% respectively.
Brexit uncertainty continued to pin the majors back as the markets awaited the EU’s decision on the Brexit extension request.
While geopolitics was negative on the day, corporate earnings provided the necessary support.
It a particularly busy day on the Eurozone economic calendar on Thursday. Key stats from the Eurozone included prelim October Private sector PMIs for France, Germany and the Eurozone.
According to the Markit surveys,
The French Manufacturing PMI rose from 50.1 to 50.5 in October, according to the prelim survey. Economists had forecast a PMI of 50.0.
Service sector activity also picked up, with the October PMI rising from 51.1 to 52.9, coming in well above a forecast of 51.6.
The pickup in private sector activity led to a rise in the composite from 50.8 to 52.6.
From Germany, the Manufacturing PMI rose by 41.7 to 41.9 in October. Economists had forecast a rise to 42.0. The German Service PMI disappointed, however, with the PMI falling from 51.4 to 51.2.
Supported by a slower rate of decline in the manufacturing sector, the Composite PMI rose from 48.5 to 48.6.
For the Eurozone, the Manufacturing PMI held steady at 45.7, coming up short of a forecast of 46.1, while the Services PMI rose from 51.6 to 51.8. Economists had forecast a rise to 51.9.
The Eurozone Composite PMI rose from 50.1 to 50.2 in October, coming up short of a forecast of 50.3. According to the prelim PMI survey,
- The flash Eurozone Composite PMI hit a 2-month high.
- Manufacturing sector output took another hit in October, with service sector growth at its weakest since 2014.
- Future expectations fell to its most pessimistic since 2013, with job growth at its lowest level since 2014.
- New orders for both goods and services fell for a 2nd consecutive month.
- Improved activity across the French private sector prevented a Eurozone contraction.
Outside of the stats, the ECB also delivered its October monetary policy decision. There were no surprises, however, in the wake of last month’s sizeable stimulus package.
From the U.S, Core Durable Goods Orders fell by 3% in September, reversing a 0.3% rise in August. Durable goods orders were also in decline, sliding by 1.1%. In August, durable goods orders had risen by 0.3%.
Private sector PMI activity was also in focus, with October’s prelim private sector PMIs providing direction late in the day.
The U.S Manufacturing PMI rose from 51.1 to 51.5 in October, with the more important Services PMI rising from 50.9 to 51.0.
On the corporate earnings front, Daimler announced an 8% rise in net profit in the 3rd quarter, with U.S tech stock results also supporting the European majors.
The Market Movers
For the DAX: It was another mixed day for the auto sector. Daimler led the way rallying by 3.44%, supported by its earnings results. Volkswagen, wasn’t far behind, with a gain of 1.66%, while BMW rose by just 0.44%. Continental bucked the trend on the day, with a 1.12% loss.
It wasn’t a mixed day for the banks, however, with Commerzbank and Deutsche Bank falling by 1.81% and by 0.85% respectively.
The top performer on the DAX30 was Infineon Tech., which rallied by 4% off the back of U.S tech earnings results on the day.
From the CAC, it was also a bearish day for the banks. BNP Paribas fell by 0.27%, with Credit Agricole down by 0.04%. Soc Gen led the way down, however, with a 1.15% loss. For the autos, it was a mixed day. While Peugeot rose by 0.89%, Renault fell by 0.06%.
Leading the way on the CAC40 was Atos, which rallied by 9.87%. The upside came off the back of news that the CEO is stepping down to become the next EU Commissioner.
On the VIX Index
The VIX saw a 2nd consecutive day in the red on Thursday, falling by 2.14%. Following on from a 3.11% decline on Wednesday, the VIX ended the day at 13.7.
U.S corporate earnings pinned the VIX back in the day, as tech stocks found much-needed support.
The Day Ahead
It’s another busy day ahead on the Eurozone economic calendar. Consumer and business confidence figures are due out of Germany later this morning.
We can expect the majors to be particularly sensitive to the numbers on the day.
From the U.S, finalized October consumer sentiment figures will likely have a muted impact on the majors later in the day.
On the corporate earnings front, while there are no marquee names delivering results, expect some influence on the day.
Geopolitical risk will also influence throughout the day, with Brexit and chatter on trade needing consideration.
In the futures market, at the time of writing, the DAX30 down by 19 points, with the Dow down by 4 points.