European Equities: Economic Woes and Geopolitics to Influence

The Majors

The European majors saw red at the start of the 4th quarter, with the CAC40 sliding by 1.41%. It wasn’t much better for the DAX30 and EuroStoxx600, which fell by 1.32% and 1.31% respectively.

Economic data did the damage on the day, with manufacturing sector data from both the Eurozone and the U.S weighing…

On the geopolitical front, Friday’s news of the U.S looking to curb inflations into China also pegged the majors back. One positive, however, was news that the administration was not planning to delist Chinese companies from the U.S exchanges.

The Stats

It was a busy day on the Eurozone economic calendar on Tuesday. Economic data included manufacturing PMI numbers out of Spain and Italy and finalized PMI numbers out of France, Germany, and the Eurozone. Later in the session, the Eurozone’s prelim inflation figures had a muted impact on the majors.

The September PMIs

Spanish Manufacturing PMI (Sep): Down from 48.8 to 47.7 versus a forecast of 48.2.

Italian Manufacturing PMI (Sep): Fell from 48.7 to 47.8 versus a forecast of 48.2.

French Manufacturing PMI (Sep) Final: Down from a prelim 50.3 to 50.1. In August, the PMI stood at 51.1

German Manufacturing PMI (Sep) Final: Up from a prelim 41.4 to 41.7, while down from an August 43.5.

Eurozone Manufacturing PMI (Sep) Final: Rose from a prelim 45.6 to 45.7, while down from an August 47.0.

According to the Eurozone Manufacturing PMI Survey,

• Output, new orders, and purchasing saw sharp declines in September.
• New orders fell at the sharpest pace since Oct-2012, with Germany reporting the largest fall since Apr-2009.
• Demand was reportedly weak both at home and abroad.
• Production saw its greatest monthly decline since Dec-2012.
• The combination of falling orders and weaker production led to a 10^th consecutive monthly decline in purchasing activity.
• Business sentiment was at its lowest level since Nov-2012, with German manufacturers the most pessimistic…

Across the region:

• Germany led the way down, with Germany’s PMI hitting its lowest level since Jun-2009. Conditions in Austria also deteriorated.
• Spain, Italy and Ireland’s manufacturing sectors also contracted in September, while activity stalled in France.
• Greece continued to outperform, though the rate of expansion fell to a 3-month low. Growth in the Netherlands was reportedly modest.

From the U.S, the manufacturing data also weighed, with the markets preferred ISM Manufacturing PMI falling from 49.1 to 47.8. Economists had forecast a rise to 50.1.

The Market Movers

From the DAX, it was a mixed start to the month for autos. Continental rose by 0.22%, whilst the rest saw red. Volkswagen slid by 1.69%, with BMW and Daimler falling by 0.36% and by 0.84% respectively.

The banks also struggled, with Deutsche Bank and Commerzbank sliding by 3.19% and 3.48% respectively.

From the CAC, it was also a bearish day for the banks. Soc Gen led the way, falling by 2.03%. BNP Paribas and Credit Agricole declined by 1.41% and 1.39% respectively. For the autos, Renault fell by 1.06%, whilst Peugeot slid by 1.75%.

On the VIX Index

The VIX Index rose by 14.29% to end the day at 18.6.

Weak manufacturing data from the Eurozone and the U.S weighed on market risk sentiment throughout the day, supporting the VIX.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Unemployment figures are due out of Spain that will likely have a muted impact on the majors later this morning.

A lack of stats will leave the majors in the hands of geopolitics and U.S ADP nonfarm employment change figures due out this afternoon.

On the geopolitical front, while news on Brexit will provide influence, concerns over the economic outlook will likely linger…

Yesterday’s PMIs and the lack of stats today pointed to a negative open for the European majors, at the time of writing.

In the futures markets, at the time of writing, the DAX was down by 34.5 points, while the Dow Mini was up by 56 points.