European Equities: Consumer Confidence, Corporate Earnings and the FED Are in FocusGerman consumer confidence and corporate earnings are in focus ahead of the FED’s 1st policy decision of the year. Updates on the coronavirus will also influence…
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 better day for the European majors on Tuesday, with the CAC40 gaining 1.07% to lead the way. The DAX30 and EuroStoxx600 saw more modest gains of 0.90% and 0.84% respectively.
While the spread of the coronavirus continued, Beijing’s containment efforts and assurances of support through liquidity were key on the day.
The Chinese government stepped in to reassure the global financial markets on Tuesday, which came as the death toll exceeded 100.
While the loss of life and the sheer number of infected are dire reading, the mortality rate remains well below that of SARS and MERS. Containment efforts have also eased concerns of a more significant spread globally.
If the spread continues and the death toll rises, however, the WHO may declare a global emergency. That would likely be the next market shock… On Monday, the WHO had raised the threat level of the virus to ‘high risk’.
It was a quiet day on the Eurozone economic calendar on Tuesday, with no material stats from the Eurozone to provide direction.
From the U.S, consumer confidence and durable goods orders provided direction later in the day.
In December, core durable goods fell by 0.1% following a 0.4% fall in November. That was the only negative, however, with durable goods orders jumping by 2.4% in December.
In January, consumer confidence also improved, with the CB Consumer Confidence Index rising from 128.2 to 131.6.
The Market Movers
For the DAX: It was a mixed day for the auto sector on Tuesday. Continental led the way, rallying by 3.86%, with Daimler and Volkswagen up by 1.87% and 0.69% respectively. BMW bucked the trend on the day, falling by 1.20%.
It was a bullish day for the banks, with Commerzbank and Deutsche Bank rallying by 2.99% and by 1.52% respectively.
Deutsche Lufthansa found much-needed support, rising by 1.69%. Elsewhere, whilst Wirecard jumped by 4.0%, Infineon Technologies (-0.97%) continued to struggle, however.
From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.13%, while Credit Agricole and Soc Gen gaining by 1.10% and 0.15% respectively.
It was also a bullish day for the French auto sector. Peugeot rallied by 2.11%, with Renault up by 1.30%.
Air France-KLM also found support, rising by 0.71% on Tuesday. Monday’s worst performer, STMicroelectronics lead the way on the CAC40, rallying by 3.52%, partially reversing Monday’s 5.77% tumble.
On the VIX Index
A 5-day winning streak came to an end on Tuesday, with the VIX falling by 10.7%. Partially reversing a 25.21% gain from Monday, the VIX ended the day at $16.3.
A shift in sentiment towards the coronavirus through the European and U.S sessions led to a rebound in the U.S markets on Tuesday.
Easing fears of a global pandemic provided support on the day as China stepped up its efforts to contain the virus, with economic data also skewed to the positive, adding further pressure on the VIX.
While the NASDAQ led the way, rallying by 1.43%, the S&P500 also found strong support, rising by 1.01%.
The Day Ahead
It’s a relatively quiet day on the Eurozone economic calendar, with Germany’s GfK Consumer Climate figures for January due out later this morning.
While we can expect the numbers to influence the DAX30, apprehension ahead of the FOMC after the European close will test risk appetite.
Before the spread of the coronavirus, optimism towards the U.S economy and beyond had supported the European majors. The latest virus will create some uncertainty over the economic outlook for the 1st quarter…
How the FED views the effect of the coronavirus on the economy is unknown and there is also the possibility of a rise in mortality rates, which would test risk appetite.
On the earnings front, Boeing, Facebook, and Siemens will be in focus on the day…
In the futures markets, at the time of writing, the DAX was down by 18.5 points, with the Dow down by 35 points.