European Equities: Futures Point to the Red as EU Recovery Fund Talks Stall

The Majors

It was mixed end to the week for the European majors on Friday, with the CAC40 falling by 0.31% to buck the trend. The DAX30 and EuroStoxx600 saw gains of 0.35% and 0.16% respectively.

Economic data from the Eurozone and the U.S failed to deliver support for a 2^nd consecutive day. Geopolitics took center stage on Friday as EU member states met to hash out the mechanics of the EU Recovery Fund.

The EU has had a number of pivotal moments in recent history and the COVID-19 pandemic has presented Brussels with another. Failure to deliver more sizeable funds to the most adversely impacted will bring into question the project once more.

A continued rise in new COVID-19 cases across the U.S didn’t help the mood. At the end of the week, the U.S reported a record-high number of new cases for Thursday.

If that wasn’t enough to test the majors, there had also been reports that Trump was planning to rile China again. This time a possible travel ban on members of the Chinese Communist Party and their families.

The Stats

It was a quiet day on the Eurozone economic calendar. Key stats included June’s finalized inflation figures for the Eurozone.

According to Eurostat,

• The annual rate of inflation picked up from 0.1% to 0.3% in June, while down from 1.3% from earlier in the year.
• Cyprus (-2.2%), Greece (-1.9%), and Estonia (-1.6%) registered the lowest annual rates.
• The highest contribution came from food, alcohol, & tobacco (+0.60 percentage points, pp).
• Services also provided support, with a 0.55 percentage point contribution.

From the U.S

It was a relatively busy day on the U.S calendar. July consumer sentiment and expectation figures were in focus.

June housing sector data had a muted impact on the day.

According to prelim figures, the Michigan Consumer Expectations Index fell from 72.3 to 66.2 in July. The Consumer Sentiment Index slipped from 78.1 to 73.2.

Concerns over the spike in new COVID-19 cases across the most populous U.S states weighed in July.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler rallied by 3.37% to lead the way. The upside on the day came from an announcement that operating losses for the 2^nd quarter would be less than expected. BMW, Continental, and Volkswagen saw more modest gains of 0.64%, 1.53%, and 2.03% respectively.

It was a bearish day for the banks, however. Deutsche Bank fell by 0.80%, with Commerzbank ending the day down by 1.76%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 1.52% and by 1.58% respectively to lead the way down. Credit Agricole saw a more modest 1.11% loss.

The French auto sector had another mixed day. Peugeot rose by 1.00%, while Renault slipped by 0.27%.

Air France-KLM and Airbus SE saw red for a 2^nd consecutive day. The pair ended the day with losses of 3.19% and by 1.64% respectively.

On the VIX Index

It was back into the red for the VIX, which fell by 8.29% on Friday. Reversing a 0.86% gain from Thursday, the VIX ended the day at 25.68.

Disappointing consumer sentiment figures for July and a new record high number of new COVID-19 cases for Thursday tested the majors.

In spite of the downside risks, there was enough support for riskier assets to sink the VIX on the day…

The S&P500 and the NASDAQ both rose by 0.28%, while the Dow slipped by 0.23%.

The Day Ahead

It’s a quiet start to the week on the Eurozone economic calendar. Key stats are limited to Germany’s wholesale inflation figures for June.

We don’t expect the numbers to have an impact on the majors, however.

From the U.S

It’s a particularly quiet start to the week, with no material stats due out of the U.S.

With economic data on the lighter side, the market focus will be on the EU Recovery Fund. EU member states failed to agree through the weekend.

Fresh spikes in new COVID-19 cases will also be a test, though expect geopolitics to be the key driver on the day. Any further moves by the U.S President to antagonize Beijing will also need consideration.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 219,728 to 14,641,819, according to figures at the time of writing. On Saturday, the number of new cases had risen by 232,868. The daily increase was lower than Saturday’s rise while up from 194,475 new cases from the previous Sunday.

Germany, Italy, and Spain reported 491 new cases on Sunday, which was up from 476 new cases on Saturday. On the previous Sunday, just 372 new cases had been reported.

From the U.S, the total number of cases rose by 65,279 to 3,898,550 on Sunday. On Saturday, the total number of cases had increased by 63,259. On Sunday, 19^th July, a total of 58,349 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was down by 24.5 points with the Dow down by 103 points.

For a look at all of today’s economic events, check out our economic calendar.