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Economic Calendar:

Thursday, 24th September

German IFO Business Climate Index (Sep)

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The Majors

It was a relatively bullish day for the European majors on Wednesday, with the CAC40 rising by 0.62% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 0.39% and 0.55% respectively.

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A sharp pickup in manufacturing sector activity in September delivered support on the day, with the Eurozone Manufacturing PMI hitting a 25-month high. Service sector activity waned, however, limiting the upside for the majors.

Adding to the upside on the day was a continued slide in the EUR, which fell back to $1.16 levels.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Ahead of the European open, German consumer confidence figures were in focus.

For October, Germany’s GfK Consumer Climate Index rose from a revised -1.7 to -1.6. Economists had forecast an increase to -1.0.

According to the GfK Survey,

  • Both economic and income expectations were on the rise, while propensity to buy tumbled.
  • The indicator for consumer income expectations rose by 3.3 points to 16.1 points.
  • There was an even sharper rise in consumer sentiment towards the German economic outlook. Economic expectations rose by 12.4 points to 24.1, logging a 5th consecutive monthly increase.
  • The propensity to buy indicator fell by 5.3 points to 38.4, however.

Later in the morning, prelim private sector PMI numbers for September were in focus.

France’s manufacturing PMI rose from 49.8 to 50.9, while the services PMI declined from 51.5 to 47.5. Economists had forecast PMIs of 50.5 and 51.5 respectively.

For Germany, the Manufacturing PMI increased from 52.2 to 56.6, while the services PMI slid from 52.5 to 49.1 Economists had forecast PMIs of 52.5 and 53.0 respectively.

In September, the Eurozone’s Services PMI slid from 50.5 to 47.6, while the Manufacturing PMI rose from 51.7 to 53.7. Economists had forecast PMIs of 51.9 and 50.5 respectively.

According to the prelim September survey,

  • The prelim Eurozone composite output index fell from 51.9 to a 3-month low 50.1.
  • On the slide was the Service PMI Activity Index that slid from 50.5 to a 4-month low 47.6.
  • By contrast, the Manufacturing PMI rose to a 25-month high 53.7.
  • For the manufacturing sector, a surge in new orders drove the PMI, with Germany’s private sector leading the way.
  • A general trend was seen across the bloc, however, with the service sector sounding the alarm bells.
  • On employment, the private sector reported a 7th consecutive month of job cuts, albeit at a slower pace.

From the U.S

It was a busier day. September’s prelim Makit private sector PMIs provided direction later in the session.

The Services PMI slipped from 55.0 to 54.6, while the Manufacturing PMI rose from 53.1 to 53.5. Economists had forecast PMIs of 54.7 and 53.1 respectively.

FED Chair Powell was also in focus on Tuesday, delivering a 2nd day of testimony on Capitol Hill. Powell talked of the need for more policy to support economic recovery. The FED Chair also noted that there is still a long way to go and that the recovery would be faster if support came from both the FED and from Congress…

The Market Movers

For the DAX: It was back into the red for the auto sector on Wednesday. BMW and Volkswagen fell by 1.08% and by 1.34% to lead the way down. Continental and Daimler saw more modest losses of 0.42% and 0.70% respectively.

It was yet another day in the red for the banks. Deutsche Bank fell by 0.83%, with Commerzbank ending the day down by 2.60%.

While there was plenty of red across the DAX, Adidas rallied by 2.68%. Better than expected Nike earnings delivered support on the day.

From the CAC, bank stocks also continued to struggle in the wake of the latest scandal. BNP Paribas fell by 2.60%. to lead the way down. Credit Agricole and Soc Gen saw more modest losses of 0.76% and 1.18% respectively.

It was another bullish day for the French auto sector, however. Peugeot and Renault ended the day with gains of 1.77% and 3.41% respectively.

Air France-KLM found much-needed support, rising by 0.12%, while Airbus SE slipped by 0.93%.

On the VIX Index

The VIX rose by 6.40% on Wednesday. Reversing a 3.31% fall from Tuesday, the VIX ended the day at 28.58.

Market reaction to dovish chatter from the FED weighed on the majors mid-week. FED Chair Powell talked of the need for more support to sustain the economic recovery.

On the economic data front, service sector activity saw marginally slower growth in September, raising further questions over the economic outlook.

The NASDAQ and S&P500 slid by 3.02% and by 2.37% respectively, with the Dow ending the day down by 1.92%

The Day Ahead

It’s a quieter day ahead on the Eurozone economic calendar. Key stats include Germany’s IFO Business Climate Index figures for September.

Expect the numbers to influence, though the latest spike in new COVID-19 cases across the EU could overshadow any upbeat numbers.

From the U.S, the weekly jobless claims figures will also draw plenty of attention later in the session.

Aside from the economic indicators, FED Chair Powell and U.S Treasury Secretary Mnuchin are also in focus…

The Futures

In the futures markets, at the time of writing, the Dow was up by 58 points, while the DAX was down by 95.5 points.

For a look at all of today’s economic events, check out our economic calendar.

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