European Equities: Futures Point to a Positive Start in Response to the FEDFutures point to a positive start to the day as the FED delivers on a rate cut and talk of more down the road should the need arise.
Friday, 20th September
- German PPI (MoM) (Aug)
It was a day in the green for the European majors on Wednesday, though there were no fireworks. The DAX30 led the way, rising by 0.14%, with the EuroStoxx600 and CAC40, rising by just 0.09% and 0.02% respectively.
Economic data failed to provide support on the day as the markets played it safe ahead of the FOMC monetary policy decision that was delivered after the European market close.
On the geopolitical front
The U.S decision to ramp up sanctions on Iran, rather than retaliate with military might, was positive on the day. Negative, however, were comments from EU Commissioner Juncker, who stated that Britain was heading for a no-deal Brexit.
It was a relatively quiet day on the Eurozone economic calendar on Wednesday. Key stats were limited to the Eurozone’s finalized August inflation figures.
According to Eurostat,
- The annual rate of inflation held steady at 1% in August, which was in line with prelim and forecast. In 2018, the annual rate of inflation had stood at 2.2%.
- Across the Eurozone, member states with the lowest annual rate of inflations were Greece (0.1%) and in Spain (-0.4%). Portugal experienced a deflation of 0.1%.
- Member states with the highest annual rate of inflations included the Netherlands and Latvia, both at 3.1%.
- For the Eurozone, the largest contribution came from services (+0.60 pp), food, alcohol & tobacco (+0.40 pp), and non-energy industrial goods (+0.08 pp).
- The annual rate of core inflation also held steady 0.9%, which was also in line with forecasts.
- Month-on-month, however, consumer prices rose by just 0.1%, coming up short of a forecast of 0.2%. Consumer prices had fallen by 0.5% in July.
From the U.S, housing sector data impressed, with building permits (+7.7%) and housing starts (+12.3%) on the surge in August, supported by the downward trend in mortgage rates.
In spite of being an equity market positive, the stats had a muted impact on the European majors.
Market uncertainty ahead of the FOMC monetary policy decision left the markets unresponsive on the day.
The Market Movers
From the DAX, the auto sector found support after a Tuesday sell-off. Continental and Daimler led the way, rising by 0.42% and 0.50% respectively. Volkswagen and BMW weren’t far behind with gains of 0.15% and 0.22% respectively.
It was a bearish day for the banks, however. Deutsche Bank slid by 1.66%, with Commerzbank falling by 2.16%.
From the CAC, it was a mixed day for the banks. Credit Agricole and BNP Paribas fell by 0.32% and by 0.16% respectively. Soc Gen bucked the trend on the day, rising by 0.22%. It was also mixed for the auto sector. Renault fell by 0.74%, whilst Peugeot gained 0.47%.
On the VIX Index
The VIX Index saw red for a 10th day in 12 on Wednesday, falling by 2.78% to end the day at 14.0. There were few drivers to give the VIX a boost on the day, with the FED’s 25 basis point rate cut and the possibility of more in line with market expectations.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction on the day.
Market reaction to the FOMC economic projections, statement, and Powell press conference will provide direction at the start of the day.
Later in the day, Philly FED Manufacturing Index figures will also provide direction.
On the geopolitical front, Brexit remains a key consideration. The news hit the wires on Wednesday that the British PM has until the end of the month to find a backstop solution. Johnson had hoped that he would have until the EU gathering in mid-October…
In the futures markets, at the time of writing, the DAX was up by 34 points, with the Dow Mini was up by 11 points.