European Equities: Economic Data from Germany and the Eurozone in Focus

The Majors

It was a mixed day for the European majors on Tuesday, following the bearish end to the month on Monday.

The DAX30 rose by 0.22%, while the CAC40 and EuroStoxx600 ended the day with losses of 0.18% and 0.35% respectively.

Economic data from the Eurozone and the U.S provided direction on the day, while tech stocks headed northwards.

August’s manufacturing PMIs delivered mixed results, contributing to the mixed day for the European majors.

Fresh spikes in new cases of COVID-19 and the likely lasting impact of the COVID-19 pandemic on businesses tested support for travel stocks and the banking sector.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Key stats included August manufacturing PMIs for Italy and Spain and unemployment numbers for Germany and the Eurozone.

Following some disappointing member state inflation figures from Monday, the Eurozone’s prelim August inflation figures were also in focus.

The PMIs

In August, Spain’s manufacturing PMI fell from 53.5 to 49.9. Economists had forecast a rise to 52.8.

Italy’s Manufacturing PMI rose from 51.9 to 53.1, which was better than a forecasted 52.0.

The finalized French PMI came in at 49.8, which was up from a prelim 49.0, while Germany’s came in at 52.2. This was down from a prelim 53.0. In Jul, the PMIs had stood at 52.4 and 51.0 respectively.

For the Eurozone, the August PMI came in at 51.7, which was in line with prelim while down from a July 51.8.

According to the Eurozone’s August Markit Survey,

• Support came from marked increases in output and new orders.
• While new orders were on the rise, the pace of increase eased from back in July.
• Growth was widespread, with all 3-market groups seeing an improvement in operating conditions compared with July.
• For the ECB, the good news was that the consumer goods category stood out once more in August.
• Bad news, however, was a 16^th consecutive monthly cut in job numbers, albeit at the slowest pace since March.
• Confidence about the future was on the rise, however, hitting the highest level for over 2-years. French firms were the least confident…
• At the country level, it was a mixed bag.
  • Italy led the way, registering the best improvement in operating conditions in over 2-years.
  • Ireland, the Netherlands, and Germany also delivered.
  • While Austria registered modest growth, Spain and France stagnated.
  • Greece saw manufacturing conditions deteriorate for a 6^th consecutive month.

Other Stats

Unemployment figures delivered positive results.

Germany’s unemployment rate held steady at 6.4%, with the number of unemployed falling by 9,000. Economists had forecast a 1k rise.

For the Eurozone, however, the unemployment rate ticked up from 7.7% to 7.9%, which was better than a forecasted rise to 8%.

On the inflation front, the Eurozone’s annual rate of core inflation softened from 1.2% to 0.4%. Economists had forecast an annual rate of core inflation of 0.8%. Year-on-year, consumer prices fell by 0.2%, partially reversing a 0.4% rise in July. In August, consumer prices fell by 0.4%, following on from a 0.4% decline in July.

According to Eurostat,

• Food, alcohol & tobacco is expected to have the highest annual rate in August (1.7% compared with 2.0% in July).
• Services are projected to have an annual rate of 0.7%, compared with 0.9% in July.
• Non-energy industrial goods are expected to see an annual rate of inflation of -0.1%, compared with 1.6% in July.
• Finally, energy is expected to see an annual rate of inflation of -7.8% compared with -8.4% in July.

From the U.S

August manufacturing PMIs were in focus, with the market’s preferred ISM numbers drawing the greatest interest.

In August, the ISM Manufacturing PMI rose from 54.2 to 56.0. Economists had forecast for the ISM to hold steady at 54.2.

The finalized Market survey manufacturing PMI came in at 53.1, which was down from a prelim 53.6, while up from July’s 50.9.

The Market Movers

For the DAX: It was yet another mixed day for the auto sector on Monday. Volkswagen rose by 1.10% to buck the trend on the day. Continental and BMW fell by 2.18% and by 1.01% respectively, however, with Daimler ending the day down by 0.49%.

It was a mixed day for the banks. Deutsche Bank fell by 0.20%, while Commerzbank eked out a 0.02% gain.

From the CAC, it was another bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.31% and by 0.86% respectively, with Soc Gen sliding by 2.59%.

It was yet another bearish day for the French auto sector. Peugeot and Renault saw losses of 2.44% and 4.47% respectively.

Air France-KLM slipped by 0.21% off the back of a 4.11% slide on Monday, while Airbus SE rose by 1.06%

On the VIX Index

It was back into the red for the VIX on Tuesday as the U.S majors hit fresh record highs once more. Following a 15.03 jump on Monday, the VIX fell by 1.10% to end the day at 26.12.

The NASDAQ rallied by 1.39%, with the S&P500 and the Dow ending the day with gains of 0.75% and 0.76% respectively.

The Day Ahead

It’s a quieter day ahead on the Eurozone economic calendar. Key stats include retail sales figures from Germany and unemployment numbers from Spain.

Expect Germany’s retail sales figures to have the greatest impact on the day.

From the U.S, August’s ADP nonfarm employment change and July factory orders will also provide direction on the day.

Away from the economic calendar, COVID-19 news will need monitoring amidst the buoyant mood ahead of the European open.

The Futures

In the futures markets, at the time of writing, the DAX was up by 92.5 points, with the Dow up by 75 points.

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