Bob Mason
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Economic Calendar:

Wednesday, 5th June

  • Spanish Services PMI (May)
  • Italian Services PMI (May)
  • French Services PMI (May) Final
  • German Services PMI (May) Final
  • Eurozone Markit Composite PMI (May) Final
  • Eurozone Services PMI (May) Final
  • Eurozone Retail Sales m/m (Apr)

Thursday, 6th June

  • German Factory Orders m/m) (Apr)
  • Eurozone GDP q/q (Q1) 3rd Estimate
  • Eurozone GDP y/y (Q1) 3rd Estimate
  • ECB Interest Rate Decision (Jun) / ECB Press Conference

Friday, 7th June

  • German Industrial Production m/m) (Apr)
  • German Trade Balance (Apr)

The Majors

The European majors followed on from Monday’s gains with a 2nd consecutive day of gains on Tuesday. Leading the way was the DAX, which rallied by 1.51%, following on from a 0.56% gain on Monday.

The CAC40 and EuroStoxx600 saw more modest gains of 0.51% and 0.59% respectively.

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Following a bearish start to the day, positive updates from China on trade talks provided support, as U.S and Mexico returned to the negotiating table.

Trump’s progress with Japan, the promise of a substantial trade deal with Britain and hopes of a resumption of talks with China were all positives on the day.

FED Chair Powell added to the upbeat sentiment later in the session. The FED Chair stated that the FED is closely monitoring the impact of the extended trade war on the U.S economy and that the FED would act appropriately to sustain the expansion.

Powell noted that any surprisingly softer inflation figures would cause the FED to step in.

The Stats

Economic data was on the lighter side on Tuesday.

Spanish unemployment change figures released in the early part of the European session had a muted impact.

Market focus was on the Eurozone’s prelim inflation numbers and April unemployment rate.

According to Eurostat, the annual rate of baseline inflation eased from 1.3% to 0.8%, according to prelim figures. The annual rate of inflation eased from 1.7% to 1.2%. Both sets of figures fell short of the market forecast.

Coupled with softer inflation figures, the Eurozone’s unemployment rate fell from 7.7% to 7.6%, which was also positive for the majors.

In spite of Germany’s economic woes, its 3.2% unemployment rate was the 2nd lowest within the Eurozone.  Behind Greece, Spain (13.8%) and Italy (10.2%) had the highest unemployment rates.

From the U.S, April factor orders and finalized orders for non-defense capital goods excl. aircraft had a muted impact as the markets responded to Powell’s speech.

The Market Movers

On the DAX, the auto sector stole the show. Daimler led the way, rallying by 4.58%. Continental and BMW weren’t far behind with gains of 4.45% and 3.71% respectively. Volkswagen trailed with a 2.63% rise on the day.

A rise in U.S Treasury yields supported the financial sector, in spite of the U.S 3-month/10-year yield curve inversion persisting.

Deutsche Bank and Commerzbank rose by 4.11% and by 4.07% respectively.

From the CAC, BNP Paribas gained 2.89%, with Credit Agricole rallying by 3.44%. Renault managed a 4.28% gain, supported by the auto sector rebound.

The Day Ahead

It’s a busy day on the economic calendar.

Spanish and Italian service sector PMI numbers are due out in the early part of the European session that will provide direction early on.

Finalized French, Germany and Eurozone PMI numbers will have less of an impact, barring a material deviation from prelim figures.

Alongside the Eurozone PMI numbers, the Eurozone retail sales figures will also have an impact early in the session.

While we can expect the stats to provide direction, trade war chatter will continue to grip the global equity markets.

From outside of the Eurozone, U.S non-manufacturing PMI numbers will also have an influence on market risk appetite.

Barring particularly dire data, the EUR is unlikely to be of much support to the European majors on the day.

At the time of writing, the DAX30 was down by 67.5 points, with the Dow Mini down by 36 points.

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