European Equities: Economic Data from Germany and the U.S in Focus

The Majors

It was another relatively bullish day for the European majors on Thursday.

The CAC40 rose by 0.52%, with the DAX30 and the EuroStoxx600 ending the day up by 0.33% and by 0.39% respectively.

Positive economic data from Germany and a modest fall in U.S jobless claims, together with an upbeat Economic Bulletin from the ECB delivered support.

Apprehension ahead of today’s U.S nonfarm payrolls pegged the majors back, however. Also negative for the markets remained the continued spread of the Delta variant that could slow the economic recovery.

The Stats

Economic data was on the lighter side on Thursday.

Factory orders from Germany was in focus ahead of the European open. Later in the session, the ECB’s Economic Bulletin was also of influence.

German Factory Orders

In June, factory orders jumped by 4.1%, month-on-month, coming well ahead of a forecasted 1.8% rise. In May, orders had tumbled by 3.7%.

According to Destatis,

• Domestic orders jumped by 9.6%, while foreign orders rose by just 0.4%.
• New orders in the euro area increased 1.3%, while new orders from outside the euro area slipped by 0.2%, compared with May 2021.
• When compared with Feb-2020, new orders were 11.2% higher and up 26.2% on the same month a year earlier.

ECB Economic Bulletin

Salient points from the Economic Bulletin Summary on Economic Activity included:

• The euro area economy rebounded in the 2^nd quarter and is on track for strong growth in the 3^rd
• Manufacturing is expected to perform strongly, even though supply bottlenecks are holding back production near-term.
• The reopening of large parts of the economy is supporting a vigorous bounce back in the services sector.
• However, the Delta variant could dampen the service sector recovery.
• Consumer spending is rising, with better job prospects increasing confidence, supported by continued government support.
• Business optimism is also on the rise, driven by domestic and global demand.
• Economic activity is expected to return to its pre-crisis level in the 1^st quarter of next year.
• But there is still a long way to go before the damage to the economic is offset.
• Significant policy support remains essential, with 3.3m fewer people employed than before the pandemic.
• An ambitious and coordinated fiscal policy should continue to complement monetary policy, underpinning confidence and supporting spending.

From the U.S

Trade data and the all-important weekly jobless claims figures were in focus later in the European session.

In June, the U.S trade deficit widened from $71.0bn to $75.7bn. Economists had forecast a deficit of $74.3bn.

Labor market numbers were of greater interest ahead of Friday’s NFP numbers, however.

In the week ending 30^th July, initial jobless claims fell from 399k to 385k. Economists had forecast a larger decline to 370k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. BMW and Daimler fell by 0.19% and by 0.74% respectively. Continental and Volkswagen ended the day with gains of 0.63% and 0.57% respectively, however.

It was a bullish day for the banks, however. Deutsche Bank rose by 1.57%, with Commerzbank gaining by 1.07%.

From the CAC, it was a mixed day for the banks. BNP Paribas rose by 0.77%, while Credit Agricole and Soc Gen fell by 0.30% and by 0.26% respectively.

It also a mixed day for the French auto sector. Stellantis NV ended the day down by 0.02%, while Renault gained 1.61%.

Air France-KLM rose by 2.88%, with Airbus SE ending the day up by 1.92%.

On the VIX Index

It was a 3^rd consecutive day in the red for the VIX on Thursday.

Following a 0.39% decline on Wednesday, the VIX fell by 3.84% to end the day at 17.28.

The S&P500 rose by 0.60%, with the Dow and the NASDAQ both ending the day up by 0.78%.

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar, with the Germany economy back in focus once more.

Key stats include German industrial production figures for June.

With a continued recovery in the German economy key to the Eurozone’s growth prospects, we can expect market sensitivity to today’s figures.

From the U.S, July’s nonfarm payrolls will be the key stat of the day, however. A marked increase in nonfarm payrolls could force the FED to shift from its current dovish stance on monetary policy.

Away from the economic calendar, corporate earnings will also provide direction.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 29 points.

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