European Equities: Capitol Hill and U.S Stimulus and COVID-19 in Focus

The Majors

It was a bullish end to the week for the European majors on Friday. The CAC40 and EuroStoxx600 rose by 0.66% and by 0.65% respectively, with the DAX30 gaining 0.58%.

Economic data from Germany coupled with hopes of further U.S stimulus supported demand for riskier assets.

While Germany’s trade surplus narrowed, both imports and exports rose by more than expected in November.

Coupled with a rise in factory orders and industrial production and a pickup in manufacturing sector activity, the stats painted a positive outlook.

From the U.S, disappointing economic data had a muted impact on the majors.

The Stats

It was a relatively busy day on the economic calendar. German industrial production and trade figures, together with French consumer spending were in focus.

In November, industrial production rose by 0.9%, following a 3.4% jump in October. Economists had forecast a 0.7% increase.

According to Destatis,

• Production in industry excluding energy and construction rose by 1.2%.
• Within industry, the production of intermediate goods increased by 2.4%, with the production of capital goods up by 1.3%.
• The production of consumer goods fell by 1.7%.
• Outside of industry, energy production was down by 3.9%, while the production in construction increased by 1.4%.
• Compared with February 2020, production in November was 3.8% lower.

Germany’s trade surplus narrowed from €18.2bn to €16.4bn in November.

According to Destatis,

• Exports were up 2.2%, and imports 4.7% on October 2020.
• Germany exported goods to the value of €111.7bn and imported goods to the value of €94.6bn compared with Nov-19.
• Compared with Nov-19, exports declined by 1.3%, and imports by 0.1%.
• Exports to EU countries fell by 1.7%, while imports grew by 2.6%, compared with Nov-19.
• To Euro area countries, exports fell by 2.2%, while imports from Euro countries rose by 0.5%.
• Exports to non-EU countries fell by 0.9% compared with Nov-19, with imports sliding by 3.2%.
• Compared with Nov-19, exports to the UK increased by 6.6%, while imports from the UK slid by 9.7%.

From France, consumer spending disappointed, with spending tumbling by 18.9%. In October, spending had risen by 3.9%.

According to Insee.fr,

• Purchases of manufactured goods slumped by 30.1%.
• Spending on textile-clothing more than halved. A 53% fall was attributed to a slump in spending on clothing & footwear.
• Energy expenditure slid by 19.2%, with food consumption falling by a more modest 5.8%.
• Compared with November 2019, household consumption expenditure on goods was 17.1% lower.

From the Eurozone, unemployment figures for the Eurozone provided support, with the unemployment rate falling from 8.4% to 8.3%.

According to Eurostat, the Eurozone’s unemployment rate had stood at 7.4% in November 2019.

From the U.S

It was a busy day on the economic calendar, with nonfarm payrolls in focus.

In December, nonfarm payrolls fell by 140K in December, partially reversing a 336k rise from November.

In spite of the decline, the unemployment rate held steady at 6.7%, with the participation rate holding steady at 61.5%.

A sharp pickup in hourly earnings was of little comfort at the end of the year. In December, average hourly earnings rose by 0.8%, following a 0.3% increase in November.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. BMW and Volkswagen fell by 1.11% and by 1.28% respectively, with Daimler declining by 0.31%. Continental bucked the trend, however, rising by 0.93%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.17%, while Commerzbank slid by 4.24%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen slid by 2.21% and by 2.01% respectively, with Credit Agricole declining by 0.74%.

It was also a bearish day for the French auto sector. Peugeot fell by 2.17%, with Renault sliding by 4.00%.

Air France-KLM fell by 1.0%, while Airbus SE bucked the trend, rising by 0.54%.

On the VIX Index

It was a 4^th consecutive day in the red the VIX on Friday, marking a 6^th day in the red from 7 sessions. Following on from a 10.77% slide on Thursday, the VIX fell by 3.62% to end the day at 21.56.

The NASDAQ rallied by 1.03%, with the Dow and the S&P500 rising by 0.18% and by 0.55% respectively.