European Equities: Economic Data, the Democratic Victory, and News from Capitol Hill in Focus

The Majors

It was a particularly bullish day for the European majors, which bounced back from Tuesday’s pullback.

The DAX30 rallied by 1.76% to lead the way, with the CAC40 and EuroStoxx600 gaining 1.39% and 1.36% respectively.

An EMA announcement of the recommendation for approval of the Moderna Inc. COVID-19 virus supported the majors. News of Germany extending its lockdown was muted by the vaccine news, in spite of France also facing the possibility of another lockdown.

From Capitol Hill, the Democrats looked set to take control of the Senate, raising the prospects of more fiscal stimulus, which also supported the upside.

The Stats

It was a busy day on the economic calendar, with the private sector PMI and inflation figures in focus.

Key stats included December service sector and composite PMI figures for Italy and Spain. Finalized PMIs from France, Germany, and the Eurozone were also in focus.

Italy’s services PMI rose from 39.4 to 39.7 in December, versus a forecasted rise to 45.3. In November, the PMI had tumbled from 46.7 to 39.4.

From Spain, the services PMI increased from 39.5 to 48.0, versus a forecasted rise to 45.0. In November, the services PMI had fallen from 41.4 to 39.5.

France’s services PMI came in at 49.1, which was down from a prelim 49.2, while up from a November 38.8.

In December, Germany’s PMI rose from 46.0 to 47.0, which was down from a prelim 47.7.

For the Eurozone, the services PMI came in at 46.4, which was down from a prelim 47.3. In November, the PMI had risen from 46.9 to 41.7.

According to the December survey,

• The Composite PMI rose from 45.3 to 49.1 in December, revised down from a prelim 49.8.
• Services remained a drag on private sector output, with activity falling for a 4^th consecutive month.
• Manufacturing sector activity, by contrast, expanded for a 6^th consecutive month.
• Ireland sat at the top of the table, with a 4-month high composite PMI of 53.4.
• Germany ranked 2^nd, with a 2-month high composite PMI of 52.0.
• Italy sat at the bottom of the table, with a 2-month high composite of 43.0.

From the U.S

It was a busy day on the economic calendar, Finalized service and composite figures were in focus along with ADP nonfarm and factory order numbers late in the European session. The stats were skewed to the negative.

ADP nonfarm employment change figures were particularly disappointing. According to the ADP, nonfarm employment fell by 123K in December, partially reversing a 304k rise in November.

In December, the Services PMI came in at 54.8 which was down from a prelim 55.3 and a November 58.4. The composite PMI came in at 55.3 which was down from a prelim 55.7 and November’s 58.6.

On the positive, factory orders rose by 1.0% in November, following a 1.3% increase in October. Economists had forecast a 0.7% rise.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. Continental and Daimler slid by 1.41% and by 1.51% respectively, while BMW and Volkswagen saw relatively modest losses of 0.59% and 0.35% respectively.

It was a bullish day for the banks, however, supported the prospects of the Democratic control of the Senate. Deutsche Bank and Commerzbank rallied by 4.68% and by 5.63% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole saw gains of 5.52% and 4.05% respectively, with Soc Gen rallying by 6.83%.

It was another mixed day for the French auto sector, however. Peugeot slid by 2.68%, while Renault rose by 0.19%.

Air France-KLM found much-needed support, rallying by 3.44%, with Airbus SE ended the day up by 0.38%.

On the VIX Index

It was a 2^nd consecutive day in the red the VIX on Wednesday, marking a 4^th day in the red from 5 sessions. Following on from a 6.04% fall on Tuesday, the VIX fell by 1.07% to end the day at 25.07.

The Dow and the S&P500 rose by 1.44% and by 0.57% respectively, while the NASDAQ fell by 0.61%.

For the U.S, both the Dow and the S&P500 gave up some of their gains as protests over Trump’s election loss hit Capitol Hill.

The blue wave materialized, with the Democrats taking control of the Senate. Expectations of more fiscal stimulus drove demand for banks and industrials, while tech stocks struggled. Greater regulatory oversight for the tech sector is anticipated following the Democrat victory, which weighed on the NASDAQ.