European Equities: Economic Data and Corporate Earnings in Focus

The Majors

It was a relatively bullish day for the European majors on Wednesday, with the CAC40 rising by 0.49% to lead the way. The DAX30 and EuroStoxx600 saw more modest gains of 0.16% and 0.44% respectively.

On Wednesday, the markets continued to shift focus away from the coronavirus. This was in spite of the death toll rising to 132 and the number of confirmed cases hitting 5,974.

The number was a poignant one, with the number of those infected with SARS having topped out at 5,327 cases over an extended period between November 2002 and July 2003.

For the majors, the upside on the day also came in spite of some mixed earnings results from the EU, with LVMH seeing earnings fall short. The markets were in a forgiving mood, however, with LVMH and other luxury brands having forewarned of the likely downside stemming from the HK riots.

While earnings and risk appetite provided direction, any major moves were limited ahead of the FOMC monetary policy decision after the European close.

The Stats

It was a quiet day on the Eurozone economic calendar on Wednesday, with GfK Consumer Climate figures out of Germany providing direction early on.

The GfK Consumer Climate Index came in at 9.9, which was up from a revised 9.7 and better than a forecast 9.8.

According to the February GfK report,

• Both income expectations and the propensity to buy improved for February, supporting the move northwards.
• The propensity to buy indicator increased by 3.3 points to 55.5, its highest level in a year.
• According to the GfK, support is expected to continue to come from private consumption.
• The economic outlook indicator also saw an improvement, rising from -4.4 to -3.7, with support likely to have come from the phase 1 trade agreement.

From the U.S, economic data included goods trade data and pending home sales figures that had a muted impact on the majors.

The focus through the latter part of the European session was on the FED’s first monetary policy decision of the year.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Volkswagen led the way down, sliding by 1.67%, with Continental down by 1.09%. BMW and Daimler saw more modest losses of 0.85% and 0.21% respectively.

It was another bullish day for the banks, however, with Commerzbank and Deutsche Bank rising by 0.54% and by 1.49% respectively.

Deutsche Lufthansa avoided a reversal of Tuesday’s gains, rising by 0.04%. Elsewhere, Wirecard and Infineon Technologies saw more red, with losses of 0.76% and 0.51% respectively.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.17% and 0.03% respectively, while Credit Agricole fell by 0.20%.

It was a bullish day for the French auto sector, however, with Peugeot and Renault rising by 1.39% and 1.66% respectively.

Air France-KLM saw red, however, falling by 0.14%.

On the VIX Index

It was back into the green for the VIX on Wednesday. Partially reversing a 10.7% fall from Tuesday, the VIX rose by 0.68% to end the day at $16.4.

The upside came late in the day as the equity markets pulled back during FED Chair Powell’s monetary policy speech. There were no major comments to cause the pullback in the equity markets. The FED’s concerns over inflation and the possible adverse effects of the coronavirus on the economic outlook likely contributed, however.

The Day Ahead

It’s a relatively busy day on the Eurozone economic calendar, with Germany unemployment and inflation figures due out. The Eurozone’s unemployment numbers are also due out ahead of 4^th quarter GDP numbers from the U.S.

From the U.S, we can expect the 4^th quarter GDP numbers to have a material impact.

On the earnings front, it’s a busier day, with Amazon.com, Lockheed Martin, and Microsoft in focus. For the DAX and wider banking sector, however, Deutsche Bank will likely steal the show…

Expect the news wires to ultimately overshadow the stats and earnings if there’s any particularly bad news on the coronavirus…

In the futures markets, at the time of writing, the DAX was down by 43.5 points, with the Dow down by 48 points.