European Equities: COVID-19 and U.S Politics in FocusIt’s Inauguration Day. Market reaction to testimony from Capitol Hill and COVID-19 news updates will likely be the key drivers in the day ahead.
Wednesday, 20th January
German PPI (MoM) (Dec)
Eurozone Core CPI (YoY) (Dec) Final
75% of retail CFD investors lose money
Eurozone CPI (MoM) (Dec) Final
Eurozone CPI (YoY) (Dec) Final
Thursday, 21st January
ECB Interest Rate Decision (Jan)
ECB Press Conference
Eurozone Consumer Confidence (Jan) Prelim
Friday, 22nd January
French Manufacturing PMI (Jan) Prelim
French Services PMI (Jan) Prelim
German Manufacturing PMI (Jan) Prelim
German Services PMI (Jan) Prelim
Eurozone Manufacturing PMI (Jan) Prelim
Eurozone Markit Composite PMI (Jan) Prelim
Eurozone Services PMI (Jan) Prelim
It was a bearish day for the European majors on Tuesday. The CAC40 fell by 0.33%, with the DAX30 and EuroStoxx600 seeing losses of 0.24% and 0.19% respectively.
News from Germany of a lockdown extension to mid-February sent the European majors into the red.
In addition to an extended lockdown, the possibility of reintroducing border controls was also raised over concerns of new COVID-19 strains.
Sentiment had been more bullish early on, with a pickup in economic sentiment in Germany and the Eurozone providing support.
Economic sentiment figures for Germany and the Eurozone and finalized German inflation figures were in focus.
For January, Germany’s ZEW Economic Sentiment Indicator rose from 55.0 to 61.8, with the current conditions indicator rising from -66.5 to -66.4.
Economists had forecasted an economic sentiment indicator of 60.0 and a current conditions indicator of -68.5.
For the Eurozone, the Economic Sentiment Indicator increased from 54.4 to 58.3.
On the inflation front, consumer prices increased by 0.5% in December in Germany, which was in line with prelim figures. Consumer prices had fallen by 0.8% in November.
According to Destatis,
- Consumer prices were down by 0.3% on the same month a year earlier.
- A temporary reduction in value added tax contributed to the fall in consumer prices.
- Energy product prices slid by 4.8%. Prices had risen by 1.4% in 2019.
- Prices of goods were down by 0.4% on 2019, while prices of services rose by 1.3%.
From the U.S
There were no material from the U.S.
The Market Movers
For the DAX: It was a mixed day for the auto sector on Tuesday. Volkswagen rose by 0.81% to buck the trend on the day. BMW and Daimler fell by 0.95% and by 1.22% respectively, while Continental saw more modest loss of 0.59%.
It was a mixed day for the banks, however. Deutsche Bank slid by 3.90%, while Commerzbank rose by 0.14%.
From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.55%, with Credit Agricole and Soc Gen sliding by 2.24% and by 2.39% respectively.
It was a mixed day for the French auto sector. Peugeot ended the day flat, while Renault fell by 1.30%.
Air France-KLM fell by 0.72%, while Airbus SE ended the day with a modest 0.12% gain.
On the VIX Index
It was back into the red for the VIX on Tuesday. Reversing a 4.69% gain from Friday, the VIX fell by 4.52% to end the day at 23.24. On Monday, the U.S markets had been closed.
The NASDAQ rallied by 1.53%, with the Dow and the S&P500 rising by 0.0.38% and by 0.81% respectively.
Support for more fiscal stimulus delivered support to the U.S markets after the Monday holiday.
Former FED Chair Yellen, nominee for Treasury Secretary talked of support for a sizeable fiscal stimulus package.
Coupled with the incoming administration’s plans to drive vaccinations, hopes of a speedier economic recovery drove the main indexes to fresh record highs.
The Day Ahead
It’s a quiet day on the economic calendar. Inflation figures from Germany and the Eurozone are due out later today.
We don’t expect the numbers to have any material impact on the European majors, however.
It’s Inauguration Day, so expect Biden’s immediate plans upon taking office to be the main area of focus.
Yellen’s support for further economic stimulus should deliver some comfort going into the open.
COVID-19 news will also continue to influence, however.
In the futures markets, at the time of writing, the Dow Mini was up by 46 points.
For a look at all of today’s economic events, check out our economic calendar.