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European Equities: FED Fence Sitting and Economic Data to Influence

By:
Bob Mason
Published: May 2, 2019, 05:46 UTC

Did the FED just spoil the bull run? Economic data and corporate earnings will be in focus through the day.

Weltweiter Handel

Economic Calendar:

Thursday, 2nd May

German Retail Sales (MoM) (Mar)

Spanish Manufacturing PMI (Apr)

Italian Manufacturing PMI (Apr)

French Manufacturing PMI (Apr) Final

German Manufacturing PMI (Apr) Final

Eurozone Manufacturing PMI (Apr) Final

Friday, 3rd May

Eurozone Core CPI (YoY) (Apr) Prelim

Eurozone CPI (YoY) (Apr) Prelim

The Majors

Two consecutive days in the green saw the majors close out April on a high note ahead of Wednesday’s Labor Day holiday.

The CAC40 led the way through the start of the week, rising by 0.31%, with the DAX30 close behind, up by 0.23%. Trailing the pair was the EuroStoxx600, which was up by just 0.03%.

Economic data released through the European session was on the heavier side on Tuesday. Key stats included GDP numbers out of France, Spain, and the Eurozone.

Supporting the major indexes was a pickup in economic activity in the 1st quarter. The Eurozone economy grew by 1.2% year-on-year, coming in ahead of a forecasted and 4th quarter 1.1%.

While the numbers were far from impressive, the very fact that there was an expansion delivered. Economic indicators through the 1st quarter had raised a number of red flags ahead of Tuesday’s stats.

Pinning back the majors on the day, however, were weaker than anticipated private sector PMI numbers out of China. Manufacturing sector activity stagnated in April according to the April NBS survey, which reported a PMI of 50.1, down from 50.5 in March.

Looking across the majors, Airbus saw red in spite of earnings coming in ahead of forecasts. Daimler and BMW were amongst the front runners on the DAX30, gaining 0.38% and 0.33% respectively.

Following some upside on Monday, the banks saw red at the end of the month, with Commerzbank and Deutsche Bank falling by 1.22% and by 0.76% respectively. BNP Paribas and UniCredit S.p.A also saw red, falling by 0.45% and by 0.26% respectively.

For the bulls, the positive end to the month left the DAX30 at the top of the major bourses, rallying by 7.1% in April. Some distance behind was the CAC40, which gained 4.4%.

The Day Ahead

For the day ahead, it’s a busy day on the economic calendar. Manufacturing PMI figures are due out of Italy and Spain, with finalized numbers due out of France, Germany, and the Eurozone.

Ahead of the PMIs, retail sales figures out of Germany will also set the tone in the early part of the session.

While the European markets were closed on Wednesday, the FED’s forward guidance on policy weighed on appetite for equities on the day. Fence sitting lowered expectations of a rate cut later in the year, a view that had supported the majors through April.

While economic data and sentiment towards FED monetary policy will need to be considered, corporate earnings will also be a key driver on the day.

The UK’s Lloyds Banking Group PLC and Germany’s Volkswagen AG will release corporate earnings today. While there are no key earnings due out of the U.S, factory order numbers could support if in line with or better than forecast.

At the time of writing, the futures were pointing to a mixed open. The DAX30 was down by 12.5 points, while the CAC40 was pointing to a 17 point rise at the open.

About the Author

Bob Masonauthor

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.

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