Risk appetite slumps early, with concerns over the coronavirus hitting the markets.
German IFO Business Climate Index (Jan)
GfK German Consumer Climate (Feb)
German Unemployment Change (Jan)
German Unemployment Rate (Jan)
Eurozone Unemployment Rate (Dec)
German CPI (MoM) (Jan) Prelim
French GDP (QoQ) (Q4) 1st Estimate
German Retail Sales (MoM) (Dec)
French Consumer Spending (MoM) (Dec)
Spanish HICP (YoY) (Jan) Prelim
Spanish CPI (YoY) (Jan) Prelim
Spanish GDP q/q (Q4) 1st Estimate
Eurozone CPI (YoY) (Jan) Prelim
Eurozone Core CPI (YoY) (Jan) Prelim
Eurozone GDP q/q (Q4) 1st Estimate
Eurozone GDP y/y (Q4) 1st Estimate
It was a bullish end to the week for the European majors, with the DAX30 rallying by 1.41% to lead the way on Friday. The CAC40 and EuroStoxx600 saw more modest gains of 0.88% and 0.86% respectively.
Support on the day came off the back of more upbeat economic data from the Eurozone and from the U.S at the end of the week.
Following the ECB’s dovish tones on Thursday, PMI numbers delivered a more optimistic mood for the markets.
Adding to the upside on the day was the World Health Organization’s decision to hold back from announcing a global emergency over the coronavirus.
The WHO’s decision came ahead of the Chinese New Year holidays, where literally hundreds of millions are expected to travel domestically and globally during the lunar holidays.
While the markets were in a buoyant mood, the reality is that the virus will have an impact on China’s economy in the 1st quarter. That’s never a good thing for the global markets and risk appetite.
It was a busy day on the Eurozone economic calendar on Friday. January prelim private sector PMIs out of France, Germany and the Eurozone provided support on the day.
France’s Composite PMI fell from 52.0 to a 4-month low 51.5 in January, according to the prelim survey. Economists had forecast a PMI of 52.0.
Germany’s Composite PMI increased from 50.2 to 51.1 in January, according to prelim figures, coming in ahead of a forecast of 50.5.
For the Eurozone, the composite PMI held steady at 50.9 in January, falling short of a forecast o5 51.2.
The all-important services PMI increased from 52.8 to 53.2, supporting a rise in the composite from 52.7 to 53.1. It wasn’t all positive, however, with the manufacturing PMI falling from 52.4 to 51.7.
For the DAX: It was yet another bearish day for the auto sector on Friday. Continental tumbled by 3.87% to lead the way, with BMW and Daimler sliding by 1.53% and 1.96% respectively. Volkswagen declined by a more modest 0.73%.
It was a bullish day for the banks, however, with Commerzbank and Deutsche Bank rising by 1.20% and by 0.26% respectively.
Deutsche Lufthansa continued to struggle, falling by 0.86%, with negative sentiment towards the coronavirus lingering.
From the CAC, it was a mixed day for the banks. BNP Paribas fell by 0.09%, while Credit Agricole and Soc Gen rose by 0.68% and by 0.05% respectively.
It was also a mixed day for the French auto sector. Peugeot rose by 0.78%, while Renault continued to struggle, falling by 1.93%.
Air France-KLM also saw red on the day, with a 0.51% fall coming off the back of the negative sentiment towards the coronavirus.
The VIX rose for a 4th consecutive day on Friday, rallying by 12.17%. Following on from a 0.54% gain on Thursday, the VIX ended the day at 14.6.
While the European majors closed out with solid gains, the U.S equities hit reverse on Friday. Updates on the spread of the coronavirus offset the effects of upbeat economic data on the day.
News of the Chinese government’s lockdown of a number of major cities had provided support earlier in the week. In spite of the government’s best efforts, the spread of the virus continued to reach new geographies.
It’s a quiet day on the Eurozone economic calendar. Germany’s Ifo Business Climate Index figures will provide direction on the day.
From the U.S, new home sales figures will likely have a muted impact on the majors on the day.
While the numbers out of Germany will influence, we can expect any chatter on EU trade tariffs and updates on the coronavirus to have a greater impact.
News of the continued spread of the virus will likely offset the effect of any positive stats on the day. Expect the European majors to kick off the week in the red…
In the futures markets, at the time of writing, the Dow was down by 284 points.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.