European Equities: Economic Data in Focus as Trade Deal Hopes Reignite…While it’s a quieter day on the economic calendar, the stats will have an influence as hopes of a trade agreement return…
Thursday, 5th December 2019
- German Factory Orders (MoM) (Oct)
- Eurozone GDP (QoQ) (Q3) 3rd Estimate
- Eurozone GDP (YoY) (Q3) 3rd Estimate
- Eurozone Retail Sales (MoM) (Oct)
Friday, 5th December 2019
- German Industrial Production (MoM) (Oct)
After a particularly bearish start to the week, the European majors were in recovery mode on Wednesday. Leading the way was the CAC40, which rallied by 1.27%. The EuroStoxx600 and DAX30 were close behind, with gains of 1.18% and 1.16% respectively.
While a pickup in Eurozone service sector activity provided support in the earlier part of the day, it was the geopolitical pendulum that swung once more in favor of the bulls…
Fresh hopes of a U.S – China phase 1 agreement supported the start of a recovery from the current week losses.
For now, the news is that a deal is anticipated before the 15th December, when the U.S is scheduled to roll out new tariffs…
It was a busy day on the Eurozone economic calendar on Wednesday. Key stats included November service sector PMIs out of Spain and Italy.
French, Germany and the Eurozone’s finalized service sector PMIs were also in focus along with the Eurozone’s composite PMI.
According to the November Markit Surveys,
From Spain, service sector activity picked up in November, with the PMI rising from 52.7 to 53.2. Economists had forecast a PMI of 51.9.
Out of Italy, service sector growth slowed in November, with the PMI falling from 52.2 to 50.4, which came in below a forecast of 51.2.
There were also mixed results from France and Germany,
In October, the French and German service PMIs had stood at 52.9 and at 51.6 respectively.
For the Eurozone, the finalized service PMI was revised upwards from 51.5 to 51.9. In October, the PMI had stood at 52.2.
The Eurozone’s Composite PMI was also revised upwards from 50.3 to 50.6, which was in line with October.
According to the Eurozone’s Composite PMI Report,
- The index remained at one of its lowest levels in the past six-and-a-half years.
- Growth in the services sector continued to be the primary driver, while the manufacturing sector continued to drag.
- The manufacturing sector was less of a drag, however, as production fell at its slowest pace since August.
- France remained the best performing member state, in spite of the composite falling to a 2-month low 52.1.
- Germany also maintained its position at the bottom of the table, in spite of a composite 2-month high 49.4.
- For the Eurozone, there was no change in the levels of incoming new work. This followed 2 consecutive months of decline.
- While new export orders fell for the 14th month in a row, the rate of decline was the slowest since June.
From the services sector
- The Business Activity Index fell from 52.2 to 51.9, the 2nd lowest reading since January.
- A muted increase in new business volumes supported modest growth.
- In spite of rising new work, exports continued to decline, however.
- While new orders were modest, job creation was at its fastest rate since August.
- Sentiment across the sector rose to 5-month high in November, though it was still well below the historical series average.
From the U.S,
In November, Nonfarm payrolls increased by just 67k, according to the ADP, which was worse than a forecasted increase of 140k. In October, nonfarm payrolls had increased by a revised 121k
The ISM Non-Manufacturing PMI came in at 53.9, which was worse than a forecast of 54.5 and October 54.7.
In spite of the disappointing numbers, the European majors found support through the U.S session, as chatter on trade continued to overshadow the numbers…
The Market Movers
For the DAX: It was a relatively day bullish for the auto sector. BMW rose by 0.83% to lead the way, with Daimler and Continental rising by 0.32% and by 0.24% respectively. Volkswagen saw a more modest 0.11% gain on the day.
It was a bullish day for the banks, however. Deutsche Bank rallied by 1.79%, with Commerzbank up by 2.22%.
From the CAC, it was also a bullish day for the banks. Soc Gen led the way, rallying by 3.07%. BNP Paribas and Credit Agricole rose by 1.60% and by 1.94% respectively.
The risk-on sentiment also supported the French Auto sector. Peugeot rose by 1.47%, while Renault gained a more modest 0.52%.
Following Trump’s tariff tantrum earlier in the week, Airbus also found support on the day, rallying by 3.16%.
On the VIX Index
The VIX hit reverse on Wednesday, falling by 7.27%. Reversing a 7.04% gain from Tuesday, the VIX ended the day at 14.8.
In spite of disappointing nonfarm payroll and service sector PMI numbers from the U.S, the downside came as sentiment towards trade turned optimistic once more.
Clearly the U.S President is mindful, post mortem, of the effect of his comments on the U.S equity markets and continues to repair the damage on each occasion…
The Day Ahead
It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone included finalized 3rd quarter GDP and October retail sales figures for the Eurozone. Earlier in the day, October factory order numbers are also due out of Germany.
Barring any downward revisions to the GDP numbers, the focus will be on factory orders and retail sales figures.
From the U.S, factory orders will also be in focus later in the day.
While we can expect influence from the numbers, chatter on trade and the UK General Election opinion polls will also provide direction.
In the futures market, at the time of writing, the DAX30 was up by 19 points, with the Dow up by 3 points.