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Bob Mason
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Economic Calendar:

Thursday, 31st October

  • German Retail Sales (MoM) (Sep)
  • Spanish GDP (QoQ) (Q3)
  • Italian CPI (MoM) (Oct)
  • Eurozone CPI (YoY) (Oct) Prelim
  • Eurozone Unemployment Rate (Sep)

The Majors

It was another mixed day for the European majors on Wednesday. The DAX30 saw red for a 2nd consecutive day, falling by 0.23%, while the CAC40 and EuroStoxx600 rose by 0.45% and 0.08% respectively.

Negative news on the trade front pressured the majors as the markets awaited the FED’s interest rate decision due after the close.

According to reports, U.S President Trump has demanded that China buy $50bn worth of U.S agri as part of the phase 1 agreement. There has been some reluctance to commit to the demand, which may delay any signing until next month.

Corporate earnings were also in focus on the day, with Deutsche Bank pulling the DAX30 into the red, after reporting a net loss in the quarter.

The Stats

It was a busy day on the Eurozone economic calendar on Wednesday. Key stats included 3rd quarter GDP and September consumer spending figures out of France. Later in the morning, Germany’s October unemployment figures also influenced.

Of less impact on the day were Spain and Germany’s prelim October inflation figures.

According to Insee,

The French economy grew by 0.3% in the 3rd quarter, quarter-on-quarter, which was better than a forecast of 0.2%. In the 2nd quarter, the economy had also grown by 0.3%.

  • Household consumption expenditures picked up from 0.2% to 0.3% providing support.
  • Total GFCF, however, slipped from a 1.2% increase in the 2nd quarter to a 0.9% increase in the 3rd
  • Final domestic demand, excl. inventory changes grew at the same pace as in the 2nd quarter and contributed 0.5 points to GDP growth.
  • Imports jumped by 1.4%, following a 0.3% decline in the 2nd quarter, while exports rose by 0.3%, reversing a 0.1% decline.
  • There was also a positive contribution from inventories that contributed 0.1 points in the quarter.

French consumer spending fell by 0.2% in September, following a stall in August. Economists had forecast a 0.1% decline.

According to Insee,

  • While consumer spending slipped in September, consumption rose by 0.4% in the 3rd
  • A slide on spending on manufacturing goods (-1.3%) weighed in September, with spending on energy (-0.1%) also weighing.
  • There was a jump in spending on food, however, which rose by 0.5% to provide support.

From Germany, while the unemployment rate held steady at 5.0% in October, the number of unemployment increased by 6k, according to Destatis, following a 10k fall in September. Economists had forecast a 5k rise.

Later in the day, economic data out of the U.S also influenced.

According to the latest ADP figures, nonfarm employment rose by 125K in October, coming in ahead of a 120k rise. In September nonfarm employment had risen by a revised 93k.

On the U.S economic front, the markets couldn’t have asked for more ahead of an anticipated rate cut later in the day.

The U.S economy grew by 1.9% in the 3rd quarter, quarter-on-quarter, coming in ahead of a forecasted 1.6%. In the 2nd quarter, the economy had grown by 2%, quarter-on-quarter.

The Market Movers

For the DAX: It was another mixed day for the auto sector. Volkswagen bucked the trend on the day, rising by 0.56%. It was bearish for the rest, with Continental sliding by 3.83% to lead the way. BMW and Daimler saw more modest losses of 0.30% and 0.73% respectively.

It was a bearish day for the banks, however, with Commerzbank falling by 3.42% and Deutsche Bank tumbling by 7.43%.

The slide in Deutsche Bank came off the back of its 3rd quarter earnings release on Wednesday. A 3rd quarter loss of €832m, attributed to restructuring costs and a fall in fixed-income trading revenue did the damage.

It was a different story for Volkswagen, however, which beat earnings estimates to support the upside on the day. The upside came in spite of lowering its outlook on deliveries due to a slowdown in the sector globally.

From the CAC, it was another day in the red for the banks. Soc Gen and BNP Paribas slid by 2.47% and by 2.23% respectively, with Credit Agricole down by 2.13%.

It was a mixed day for the autos, however. Peugeot rallied by 4.53%, while Renault slid by 4.02% on the day.

The upside for Peugeot came off the back of M&A chatter with Fiat Chrysler. L’Oreal was the best performer on the day, however, rallying by 7.56% in response to solid 3rd quarter earnings numbers.

On the VIX Index

The VIX Index saw red for the first day in three, falling by 6.59% on Wednesday. Reversing a 0.69% gain from Tuesday, the VIX ended the day at 12.3.

A late in the day reversal left the VIX in the red, as the markets responded to the FED rate cut, which had been anticipated.

The Day Ahead

It’s another busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include the Eurozone’s 1st estimate GDP numbers for the 3rd quarter and September retail sales figures out of Germany.

The Eurozone’s September unemployment rate and prelim October inflation figures will also be in focus.

Prelim October inflation figures out of France and Italy and 3rd quarter GDP numbers out of Spain will likely have less influence on the day.

From the U.S, it’s also a busy day on the economic calendar, with September Core PCE Price Index and personal spending figures due out.

There are also corporate earnings to consider along with any further updates from Beijing and Washington on phase 1 of the trade agreement.

Ahead of the European session, October private sector PMI numbers from China failed to weigh in spite of the manufacturing sector contracting for a 6 consecutive month.

In the futures market, at the time of writing, the DAX30 was up by 18.5 points, with the Dow up by 9 points.

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