European Equities: Can the Majors Really Continue to Rise with Weak Stats?

The Majors

The European majors followed on from Friday’s bounce with further gains at the start of the 3^rd quarter. Finding support from news from the G20 Summit, the DAX gained 0.99% to lead the way. For the CAC and EuroStoxx600, the gains were more modest. The CAC40 rose by 0.52%, while the EuroStoxx600 gained 0.78% on the day.

While the HK markets were closed, the CSI surged by 2.88% through the Asian session and the Nikkei by 2.13% to set the tone.

An agreement between Trump and Xi to resume trade negotiations during Saturday’s meeting at the G20 Summit drove the majors.

A more than 0.5% slide in the EUR through to the European market close added to the upside for the majors on the day.

The Stats

Economic data out of the Eurozone was on the heavier side on the day.

Key stats due out of the Eurozone included finalized French, German and Eurozone manufacturing PMI numbers for June. Ahead of the numbers, Italy and Spain’s manufacturing PMIs were also in focus. Later in the morning, Eurozone unemployment figures had a muted impact on the majors. The Eurozone’s unemployment rate fell from 7.6% to 7.5% in May.

The stats were skewed heavily towards the negative on the day, with the only positive being the fall in the Eurozone’s unemployment rate.

For the manufacturing PMIs:

• Germany’s finalized PMI came in at a 4-month high 45.0, which was below a prelim 45.4, while up from May’s 44.3.
• France’s finalized manufacturing PMI was also revised downwards from 52.0 to 51.9. In spite of the downward revision, the PMI was up from a finalized May 50.6 to hit a 9-month high.
• As a result of downward revisions and weaker than anticipated PMIs out of Spain and Italy, the Eurozone’s manufacturing PMI came in at 47.6. The PMI was down from a prelim 47.8 and May 47.7.
• Spain’s PMI fell from 50.1 to a 74-month low 47.9 in June, with Italy’s PMI sliding from 49.7 to a 3-month low 48.4.
• Topping the manufacturing sector rankings was Greece, with a 19-month low 52.4…
• Of concern for the ECB will be continued falls in, both output and new orders.

German unemployment numbers also failed to impress. Following a 60k rise in unemployment in May, unemployment fell by just 1k in June. Forecasts were for a 3k fall. In spite of the weak hiring, the unemployment rate held steady at 5%.

In stark contrast to the EU numbers, economic data out of the U.S was on a more positive footing. The market’s preferred ISM manufacturing PMI slipped from 52.1 to 51.7, in spite of the ongoing trade war. While continuing to expand, new orders did stagnate in June, however, which will raise some concern.

Adding to the upside was a revised Markit survey manufacturing PMI, which came in at 50.6, up from a prelim 50.1 and May 50.5.

The Market Movers

From the DAX, concessions for Huawei provided support for the tech sector, with Infineon Technologies (“IFX”) rallying by 4.51%. Wirecard (“WDI”) was also a front runner, rallying by 2.91%.

From the auto sector, Volkswagen led the way, rising by 1.27%. While BMW eked out a 0.49% gain, Continental and Daimler saw red with losses of 0.39% and 0.18% respectively. The losses came late in the day as the markets began to consider the stats through the day and the unlikelihood of a quick end to the U.S – China trade war.

With such dire PMI numbers out of the Eurozone, it’s going to need to be a miraculous trade agreement to reignite the economy.

From the banking sector, Deutsche Bank rose by 0.49%, while Commerzbank gained 0.68% on the day.

From the CAC, BNP Paribas and Credit Agricole gained 0.77% and 2.28% respectively, while Renault fell by 0.76% on the day.

The Day Ahead

It’s a quieter day ahead.

Key stats are limited to Germany’s retail sales figures for May. Following some disappointing numbers on Monday, any weak figures will test support for the DAX.

From the numbers, there appears to be no quick fix for the Eurozone economy. While Draghi has assured support, the latest shift in sentiment towards FED monetary policy could bring into question any immediate action.

There’s also the prospect of Trump threatening the EU with tariffs to also consider…

The majors ran out of steam through the day on Monday and there could be some profit taking through today…

At the time of writing, the DAX was up by 13 points. The Dow Mini was up by 10 points.