European Equities: Can Nonfarm Payrolls Save the Day?

The Majors

With Germany on holiday, volumes were on the lighter side in what was a mixed day for the European majors on Thursday. The CAC40 rose by 0.30% on Thursday, while the EuroStoxx600 slipped by 0.02%.

Another set of weak economic data pinned back the CAC40, while a pickup in service sector activity in Italy limited the downside for the EuroStoxx600.

On the geopolitical front, the U.S administration announced plans to hit the EU with tariffs, adding to the market angst. While the EU is embroiled in a Brexit battle with the UK, the EU is unlikely to throw in the towel. More doom and gloom to come or a rapid resolution? That is anyone’s guess…

The Stats

It was a busy day on the Eurozone economic calendar on Thursday. Service sector PMIs out of Spain and Italy kicked off the session.

Finalized French and German service sector PMIs and, the Eurozone’s finalized services and composite PMI also influenced.

The Spanish Services PMI fell from 54.3 to 53.3 in September, which was worse than a forecasted 53.8.

Italy’s Services PMI rose from 50.6 to 51.4, which was also better than a forecasted 50.4.

French Services PMI Final stood at 51.1, which was down from a prelim 51.6 and August’s 53.4.

German Services PMI Final stood at 51.4, which was down from a prelim 52.5 and August’s 54.8

Eurozone Services PMI Final stood at 51.6, down from a prelim 52.0 and August 53.5

Eurozone Markit Composite PMI Final came in at 50.1, which was down from a prelim 50.4 and August 51.9.

According to the finalized Eurozone Markit PMI survey,

• The composite fell to the lowest level since Jun-2013, as the manufacturing sector contracted at a quicker pace and service sector activity stalled.
• Modest growth in the services sector was the weakest this year.
• Germany’s private sector contracted for the first time since April-2013.
• Growth elsewhere also failed to impress, with France and German reporting only a marginal increase in activity.
• Spain and Ireland reported slower private sector growth.
• Incoming new work weighed on the Eurozone composite, with data showing that new business fell by the greatest degree since mid-2013.
• Export trade remained a key source of business weakness, with new export orders falling once more in September.
• In spite of weaker business activity, employment growth was sustained in the month, though the pace of hiring was the weakest in three-and-a-half years.
• By country, Spain ranked #1 with a 2-month low composite PMI. Germany ranked 5^th, with the composite hitting an 83-month low.

Later in the session, Eurozone retail sales rose by 0.3%, month-on-month, in August, which was in line with forecasts. In July, retail sales had fallen by 0.5%. According to Eurostat,

• Compared with Jul-2019, sales of non-food produces and automotive fuels rose by 0.4% and 0.1% respectively to deliver the upside. Sales of food, drinks, and tobacco remained unchanged.
• Portugal (+1.1%), Estonian (1%) and Finland (0.8%) reported the largest increases in sales.
• Austria and Slovakia reported the largest falls in sales, with both falling by 1.3%.
• Year-on-year, retail sales rose by 2.1%.

From the U.S, the ISM non-manufacturing PMI fell from 56.4 to 52.6, which also weighed.

The Market Movers

The DAX was closed on Thursday.

From the CAC, it was a bearish day for the banks. Soc Gen led the way, sliding by 1.27%. Credit Agricole and BNP Paribas fell by 0.91% and 0.89% respectively. For the autos, Renault slid by 0.92%, whilst Peugeot fell by 0.89%.

On the VIX Index

The VIX Index fell by 7% to end the day at 19.1.

Disappointing data and the talk of tariffs on EU goods failed to sink the majors on the day, with U.S equities closing ou the day in the green.

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats due out to provide the majors with direction.

A lack of stats will leave the majors in the hands of U.S stats and geopolitical risk.

From the U.S, its nonfarm payrolls and wage growth figures that will have an impact on the European majors this afternoon.

Expect any weak numbers to weigh heavily as concerns over the global economic outlook linger.

On the geopolitical front, it’s the week before trade talks resume and its Friday. It wouldn’t be the first time that the U.S President sent a few tweets to get the blood boiling ahead of talks…

There’s also impeachment chatter and Brexit to consider on the day.