European Equities: Can the DAX Make it 7 in-a-row?A quiet day ahead leaves the majors to consider Eurozone retail sales figures and geopolitical risk. Can the DAX make it 7-in-a-row?
Thursday, 4th July
- Eurozone Retail Sales m/m (May)
Friday, 5th July
- German Factory Orders m/m (May)
- German Industrial Production m/m (May)
The European majors were on the rise once more. Leading the way on the day was the EuroStoxx600, which rose by 0.85%. The DAX30 and CAC40 weren’t far behind, with gains of 0.71% and 0.75% respectively.
For the DAX30, it was a 6th consecutive day in the green.
Economic data out of the Eurozone was on the heavier side on the day.
Key stats out of the Eurozone included finalized service sector and composite PMI numbers for France, Germany, and the Eurozone. Ahead of the finalized numbers, Spain and Italy’s PMI numbers also provided direction.
The stats were skewed to the positive on the day, with both Spain and Italy reporting a pickup in service sector activity.
While France’s finalized service sector PMI came in lower than prelim numbers, both the Eurozone’s service sector PMI and composite saw upward revisions from prelim.
For the Eurozone, the composite PMI came in at 52.2, up from a prelim 52.1 and May’s 51.8. According to the final report,
- Ireland’s composite PMI hit a 4-month high to come in at the top of the table. France’s PMI rose to a 7-month high to come in 2nd.
- Germany and Spain ranked 3rd and 4th respectively, with Italy trailing in spite of hitting a 3-month high.
- The Eurozone’s composite was the highest recorded since November 2018, supported by the upward trend in service sector activity. The manufacturing sector activity continued to drag.
From the U.S, falling U.S Treasury yields and a rise in the U.S majors provided further support. Disappointing economic data out of the U.S weighed on yields, with the weak stats supporting the prospects of a FED rate cut later in the year.
Weaker than expected ADP nonfarm employment change figures and slower service sector activity led to the fall in yields.
Outside of the numbers, the European majors also found support from news of IMF head Christine Lagarde being appointed the new ECP President.
Market sentiment is that Lagarde would favor a low-interest rate environment, which would be aligned with outgoing President Draghi’s stance.
The Market Movers
From the DAX, Deutsche Bank and Commerzbank rallied by 3.23% and by 3.72% respectively. It was a mixed bag for the auto sector, however. BMW led the way with a 1.94% gain. Volkswagen was close behind, rising by 1.72%. While Daimler rose by 0.69%, Continental bucked the trend on the day, sliding by 1.2%.
Support from Deutsche Bank came from news of talks being held with a number of banks on the sale of certain segments of its equities business.
From the CAC, BNP Paribas and Credit Agricole rose by 1.68% and 0.88% respectively, while Renault gained 0.31% on the day.
The Day Ahead
It’s a quiet day ahead. The Eurozone’s May retail sales figures are due out later this morning. While we would expect the numbers to have some influence, market sentiment towards the economic outlook will likely be a distraction.
On the geopolitical front, any talk of tariffs or rising tension in the Middle East will also have an impact on the day.
Volumes will be on the lighter side later on in the day, with the U.S markets closed in recognition of Independence Day.
At the time of writing, the DAX was up by 9 points, while the Dow Mini was down by 21 points.