European Equities: Economic Data from Germany and Central Bank Chatter in FocusIt’s a quieter day ahead on the economic calendar. German retail sales figures will draw interest later this morning. A lack of stats from the U.S will also give FOMC chatter greater weighting.
Wednesday, 2nd June
German Retail Sales (MoM) (Apr)
Thursday, 3rd June
Spanish Services PMI (May)
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Italian Services PMI (May)
French Services PMI (May) Final
German Services PMI (May) Final
Eurozone Markit Composite PMI (May) Final
Eurozone Services PMI (May) Final
Friday, 4th June
German IHS Markit Construction PMI (May)
Eurozone Retail Sales (MoM) (Apr)
ECB President Lagarde Speaks
It was bullish day for the European majors on Tuesday, with economic data from the Eurozone delivering support.
The DAX rose by 0.95%, with the CAC40 and the EuroStoxx600 seeing gains of 0.66% and 0.75% respectively.
Economic data from early in the session continued to fuel market optimism over the economic outlook.
Manufacturing sector PMIs from China and the Eurozone and unemployment figures from Germany and the Eurozone were all skewed to the positive.
The ECB’s assurances of unwavering support also limited the impact of a further pickup in inflationary pressure.
It was a particularly busy start to the day on the economic data front. From the Eurozone, manufacturing sector PMIs and German unemployment figures influenced.
Unemployment and inflation figures for the Eurozone were also in focus.
Manufacturing Sector PMIs
In May, Spain’s manufacturing PMI increased from 57.7 to 59.4, with Italy’s PMI rising from 60.7 to 62.3.
Economists had forecast PMIs of 59.5 and 62.0 respectively.
Finalized PMIs from France, Germany, and the Eurozone also drew attention.
Germany’s PMI fell from 66.2 to 64.4, which was up from a prelim 64.0.
France’s manufacturing PMI increased from 58.9 to 59.4, up from a prelim 59.2.
A pickup in manufacturing sector activity in Italy and Spain and upward revisions to French and German PMIs led to an upward revision to the Eurozone’s manufacturing PMI.
In May, the Eurozone’s manufacturing PMI increased from 62.9 to a new record high 63.1, which was up from a prelim 62.8.
According to the Eurozone’s Markit Survey,
- All three market groups recorded strong improvements in operating conditions.
- Investment goods producers were the best performing in May, reporting marked increases in output and new orders.
- Intermediate goods and consumer goods categories both saw stronger growth.
- New orders surged off the back of demand across the bloc and from overseas.
- Sourcing inputs from vendors constrained production activity.
- Deliveries from suppliers deteriorated at a severe and unprecedented rate in the month.
- As a result, input costs jumped again, with output prices rising at the fastest pace on record.
- Firms increased payrolls, with the rate of hiring the most marked since January 2018.
- Sector optimism remained high, while easing to its lowest level in the last 4-months.
- The Netherlands (69.4) and Austria (66.4) hit new record highs to rank 1st and 2nd.
- Germany came in 3rd in spite of a 3-month low PMI of 64.4.
- Ireland (64.1) and Italy (62.3%) also hit record highs to rank 4th and 5th
- France (248-month high), Spain (276-month high), and Greece (253-month high) sat at the bottom of the rankings.
Employment figures from Germany were also skewed to the positive.
In May, unemployment fell by 15k, reversing an 8k rise from April. As a result of the fall, the unemployment rate held steady at 6.0%, which was in line with forecasts. Economists had forecast a more modest 9k fall in unemployment, however.
In April, the Eurozone’s unemployment rate fell from 8.1% to 8.0%. Economists had forecast the unemployment rate to hold steady at 8.1%.
According to Eurostat,
- In April 2020, the unemployment rate had stood at 7.3%.
- In April, 2021, the number of unemployed was up by 1.275m, when compared with April 2020.
- Compared with March 2021, the number of persons unemployed decreased by 134,000.
The Eurozone annual rate of inflation is expected to be 2.0% in May 2021, up from 1.6% in April, based on prelim figures.
According to Eurostat,
- Energy is expected to have the highest annual rate in May, 13.1% compared with 10.4% in April.
- Services inflation is expected to pick up from 0.9% in April to 1.1% in May.
- Non-energy industrial goods 0.7% compared with 0.4%.
- Food, alcohol, & tobacco prices are expected to rise by 0.6% year-on-year, which is stable when compared with April 2021.
From the U.S
It was a relatively quiet day on the economic calendar following Monday’s holiday.
The manufacturing sector was also in focus, with the market’s preferred ISM Manufacturing PMI drawing attention.
In May, the ISM Manufacturing PMI increased from 60.7 to 61.2. Economists had forecast a modest rise to 60.8.
The market survey finalized manufacturing PMI was also out but had a muted impact on the broader markets.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Tuesday. Continental rallied by 4.03% to lead the way, with Volkswagen rising by 3.13%. BMW and Daimler ended the day up by 2.82% and by 2.62% respectively.
It was also a bullish day for the banks. Deutsche Bank rose by 2.51%, with Commerzbank gaining 1.52% on the day.
From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 1.54% and by 1.24% respectively, with Credit Agricole gaining 2.07%.
It was a relatively bullish day for the French auto sector, however. Stellantis NV and Renault ended the day with modest gains of 0.54% and 0.55% respectively.
Air France-KLM and Airbus SE found strong support, however, rising by 2.75% and by 1.97% respectively.
On the VIX Index
It was a 2nd consecutive day in the green for the VIX on Tuesday.
Following a 0.12% gain on Friday and Monday’s holiday, the VIX rose by 6.80% to end the day at 17.90.
The Dow eked out a 0.13% gain, while the NASDAQ and the S&P500 ended the day down by 0.09% and by 0.05% respectively.
The Day Ahead
It’s a quieter day ahead on the European economic data front, following Tuesday’s data dump.
The German economy is back in focus, with retail sales for April due out. The markets will be looking for a further pickup in spending to support the optimistic economic outlook.
From the U.S, there are no material stats to provide direction later in the day.
The lack of stats will likely leave the European majors in the hands of central bank chatter late in the day.
In the futures markets, at the time of writing, the Dow Mini was down by 21 points.
For a look at all of today’s economic events, check out our economic calendar.