European Equities: Can the Majors Settle? There Are No Stats from the Eurozone to DistractAfter Monday’s sell-off, it will be down to the news wires on what’s next for the majors. A further spread and action by the WHO could deliver another blow.
Wednesday, 29th January
GfK German Consumer Climate (Feb)
Thursday, 30th January
German Unemployment Change (Jan)
German Unemployment Rate (Jan)
Eurozone Unemployment Rate (Dec)
German CPI (MoM) (Jan) Prelim
Friday, 31st January 2020
French GDP (QoQ) (Q4) 1st Estimate
German Retail Sales (MoM) (Dec)
French Consumer Spending (MoM) (Dec)
Spanish HICP (YoY) (Jan) Prelim
Spanish CPI (YoY) (Jan) Prelim
Spanish GDP q/q (Q4) 1st Estimate
Eurozone CPI (YoY) (Jan) Prelim
Eurozone Core CPI (YoY) (Jan) Prelim
Eurozone GDP q/q (Q4) 1st Estimate
Eurozone GDP y/y (Q4) 1st Estimate
It was a particularly bearish start to the week, with the DAX30 sliding by 2.74% to lead the way down. The CAC40 and EuroStoxx600 weren’t far behind, with losses of 2.68% and 2.26% respectively.
Market concerns over the possible impact of the spread of the coronavirus on China and the global economy weighed on the day.
The losses came despite the World Health Organisation holding back from declaring a global emergency. With borders still open and the death tolls and number infected rising, the virus had spread beyond the region by Monday.
Australia, Canada, and France joined the list of nations reporting cases of the virus.
Economic data out of Germany contributed to the slide in the DAX, with the IFO Business Climate Index figures disappointing at the start of the year.
It was a relatively busy day on the Eurozone economic calendar on Monday. Germany’s IFO Business Climate Index figures were in focus in the early part of the European session.
Germany’s IFO Business Climate Index fell from 96.3 to 95.9 in January. Economists had forecast an increase to 97.0.
- The decline came as companies’ took a more pessimistic view on the economy in the coming months. In January, the Business Expectations Index fell from 93.9 to 92.9, falling well short of a forecast of 95.0.
- Sentiment towards current conditions improved, with the sub-index rising from 98.8 to 99.1 but it wasn’t enough to offset the more negative outlook.
Looking across the sectors:
- Manufacturing showed signs of recovery, with the business climate index jumping from -5.0 to -1.6. The upside came from a marked improvement in the current situation index, which saw its largest increase since Feb-17. Companies were also less pessimistic.
- Services weighed, however, with the business climate index falling from 21.3 to 18.7. The business expectations sub-index weighed on the headline number in January.
The Market Movers
For the DAX: It was a bearish start to the week for the auto sector. Volkswagen led the way, sliding by 2.88%, with Continental and Daimler falling by 2.54% and 2.34% respectively. BMW saw a more modest loss of 1.50%.
It was also a bearish day for the banks, with Commerzbank and Deutsche Bank falling by 1.17% and by 0.35% respectively.
Deutsche Lufthansa continued to struggle, tumbling by 3.61%, with negative sentiment towards the coronavirus weighing. On the DAX30, however, it was Wirecard that led the way down, with a 5.12% loss on Monday. A sizeable exposure to China sinking the stock on the day.
Other stocks with large exposure to China that struggled included Adidas (-3.27%) and Infineon Technologies (-2.50%) that were also amongst the worst performers on Monday.
From the CAC, it was a particularly bearish day for the banks. BNP Paribas slid by 2.08%, while Credit Agricole and Soc Gen falling by 1.99% and by 1.37% respectively.
It was also a bearish day for the French auto sector. Peugeot slid by 2.78%, with Renault falling by 1.99%.
Air France-KLM saw particularly heavy losses on the day, sliding by 5.64%, while STMicroelectronics (-5.77%) saw the heaviest loss on the day.
On the VIX Index
For the VIX, it was a 5th consecutive day in the green on Monday. Following a 12.17% rally on Friday, the VIX surged by 25.21% to end the day at 18.2.
The upside, which included a 1st visit to 19 levels since October, came off the back of the market reaction to the spread of the coronavirus.
Across the global financial markets, the major bourses saw heavy losses as growth fears hit.
From the U.S, the S&P500 and Dow both fell by 1.57% on the day, while tech stocks saw heavier losses, leaving the NASDAQ down by 1.89%.
The Day Ahead
It’s a quiet day on the Eurozone economic calendar, with no material stats due out of the Eurozone to provide the majors with direction.
From the U.S, core durable goods orders and consumer confidence figures will provide direction later in the day.
While we can expect the U.S numbers to influence, market sentiment towards trade and the continued spread of the coronavirus will remain the key driver.
In the futures markets, at the time of writing, the DAX was up by 16 points, with the Dow up by 84 points.