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Economic Calendar:

Monday, 3rd February 2020

Spanish Manufacturing PMI (Jan)

Italian Manufacturing PMI (Jan)

French Manufacturing PMI (Jan) Final

German Manufacturing PMI (Jan) Final

Eurozone Manufacturing PMI (Jan) Final

Tuesday, 4th February 2020

Spanish Unemployment Change

Italian CPI (MoM) (Jan) Prelim

Wednesday, 5th February 2020

Spanish Services PMI (Jan)

Italian Services PMI (Jan)

French Services PMI (Jan) Final

German Services PMI (Jan) Final

Eurozone Markit Composite PMI (Jan) Final

Eurozone Services PMI (Jan) Final

Eurozone Retail Sales (MoM) (Dec)

Thursday, 6th February 2020

German Factory Orders (MoM) (Dec)

ECB Economic Bulletin

EU Economic Forecasts

Friday, 7th February 2020

German Industrial Production (MoM) (Dec)

German Trade Balance (Dec)

French Non-Farm Payrolls (QoQ) (Q4)


The Majors

It was a bearish end to the week for the European majors, with the DAX30 falling by 1.33% to lead the way down. Things were not much better elsewhere, with the CAC40 and EuroStoxx600 falling by 1.11% and 1.07% respectively.

A 2nd consecutive day in the red came off the back of market jitters over the continued spread of the coronavirus.

Economic data at the end of the week added to the downside for the European majors.

The markets had become somewhat more optimistic following the signing of the phase 1 trade agreement.

Threats of U.S tariffs on the EU coupled with the likely negative effect of the coronavirus on China and the global economy tarnished that optimism, however.

Late last week, the number of countries shutting down borders were on the rise, which will not only impact tourism but also trade.

The Stats

It was a busy day on the Eurozone economic calendar on Friday.

Key stats included 4th quarter GDP numbers out of France, Spain, and the Eurozone. Retail sales numbers out of France and Germany and Eurozone inflation figures also influenced.

The numbers were certainly skewed to the negative at the end of the week.

On the GDP front, the French economy contracted in the 4th quarter, with the Eurozone economy growing by just 0.1%.

While Spain saw growth pick up to 0.5% in the 4th quarter, it was of little consolation.

Consumer spending also raised red flags at the end of the year. German retail sales slumped by 3.3% in December, with French consumer spending falling by 0.3%.

If the markets wanted more bad news, the Eurozone’s core annual rate of inflation softened from 1.3% to 1.1%.

Following prelim private sector PMI numbers for January, there had been the hope of better news on the data front. Friday’s figures came as the markets considered the likely impact of the coronavirus on the economy.

The numbers preceded this week’s economic forecasts and ECB economic bulletin and supported ECB President Lagarde’s less than an optimistic view on the economy.

The Market Movers

For the DAX: It was a bearish end to the week for the auto sector. Daimler led the way down, sliding by 3.14%, with BMW (-2.46%) and Volkswagen (-2.21%) also seeing heavy losses. Continental saw a more modest 1.63% fall on the day.

It was also a bearish day for the banks. Commerzbank fell by 0.55%, with Deutsche Bank sliding by 2.01%.

Deutsche Lufthansa saw more red, sliding by 2.31%. Elsewhere, Infineon Technologies tumbled by 4.68%, with Wirecard slumping by 5.80%.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.73%, with Credit Agricole and Soc Gen down by 0.41% and 0.97% respectively.

It was also a bearish day for the French auto sector. Peugeot slid by 2.69%, while Renault fell by 0.94%

Air France-KLM closed out the day with a 1.25% loss.

On the VIX Index

Market risk aversion drove the VIX northwards on Friday. Reversing a 5.49% decline from Thursday, the VIX jumped by 21.63% on Friday to end the day at 18.8.

Market panic over the continued spread of the coronavirus and person to person transfer outside of China weighed on risk appetite.

U.S equities joined the European majors in the red at the end of the week, with the U.S declaring a national emergency.

The Day Ahead

It’s a busy day on the Eurozone economic calendar, with January manufacturing PMI figures for Italy and Spain due out. Finalized French, German and Eurozone manufacturing PMI numbers are also due out.

Barring deviation from prelim figures, we expect Italy and the Eurozone’s PMI numbers to have the greatest influence on the majors.

From elsewhere, China’s Caixin manufacturing PMI and January’s ISM Manufacturing PMI from the U.S will also influence.

It will ultimately come down to the news wires and updates on the coronavirus, however. From the weekend, there was nothing positive to ease demand for the safe havens.

The number of cases soared beyond 15,000 with the mortality rate holding at 2%. A first death outside of China will also add to the market jitters…

Across the Asian majors, the equity markets saw red early on as the Chinese markets opened following the extended CNY break. The pullback came in spite of the news of the PBoC planning a cash injection to ease market angst.

In the futures markets, at the time of writing, the DAX was down by 19.5 points, while the Dow up by 79 points.

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