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European Equities: Geopolitics and Consumer Confidence in Focus

Futures are pointing to a positive start but German consumer confidence and Italian politics could spoil the day…
Bob Mason
Weltweiter Handel

Economic Calendar:

Wednesday, 28th August

  • GfK German Consumer Climate (Sep)

Thursday, 29th August

  • French Consumer Spending (MoM) (Jul)
  • French GDP (QoQ) (Q2)
  • Spanish HICP (YoY) (Aug) Prelim
  • German Unemployment Change & Rate (Aug)
  • German CPI (MoM) (Aug) Prelim

Friday, 30th August

  • German Retail Sales (MoM) (Jul)
  • Italian CPI (MoM) (Aug) Prelim
  • Eurozone CPI (YoY) (Aug) Prelim
  • Eurozone Unemployment Rate (Jul)

The Majors

The European majors spent the 2nd day in the green on Tuesday. Leading the way on the day was the CAC40, which rose by 0.67%. Close behind were the EuroStoxx600 and DAX30, which gained 0.63% and 0.62% respectively.

Economic data continued to have a muted impact on the majors as the markets reacted further to the softening in trade war rhetoric.

On the day, the Chinese government announced that it may relieve restrictions on auto purchases to support domestic consumption.

From Italy, trouble in politics pinned back the majors as the Five Star Movement struggled to form a new coalition government. Talks are set to continue despite the passing of the Tuesday deadline.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Economic data was limited to Germany’s 2nd estimate GDP numbers for the 2nd quarter and 2nd quarter jobseeker numbers out of France.

According to Destatis,

  • The German economy shrank by 0.1%, quarter-on-quarter, affirming 1st estimate numbers,
  • In the 1st quarter of 2019, the economy had grown by 0.4%.
  • A shift on foreign trade weighed on the German economy, with exports sliding by 1.3%, while imports fell by just 0.3%.
  • On the upside, support came from household consumption (+0.1%) and government final consumption expenditure (+0.5%).

Out of France, the total number of job seekers increased from 3,382.6k to 3,393.4k.

From the U.S, support came from better than anticipated consumer confidence figures. While the U.S – China trade war wages on, consumers appear to remain confident in the current labor market conditions…

The CB consumer confidence index rose slipped from 135.8 to 135.1 in August. Whilst weaker, the marginal decline was considered a positive considering the deterioration in market risk appetite.

The Market Movers

From the DAX, it was a mixed day for the auto sector. Volkswagen rose by 0.96%, supported by the Chinese government’s announcement on relaxing regs on autos. BMW (0.23%), Continental (-0.65%), and Daimler (-0.07%) saw red, however.

The shift in sentiment towards trade also delivered mixed results for bank stocks. Deutsche Bank rose by 0.97%, while Commerzbank ending the day down by 0.36%.

From the CAC, bank stocks saw red on the day. BNP Paribas fell by 0.55%. Credit Agricole and Soc Gen also saw red, with losses of 0.59% and 0.51% respectively. From the auto sector, Renault and Peugeot rose by 1.63% and 2.69% respectively.

The Day Ahead

It’s another relatively busy day ahead on the Eurozone economic calendar. Germany’s GfK September consumer confidence figures are due out.

Weaker than forecasted numbers would be negative for the majors as the German economy heads towards a recession.

Outside of the numbers, the markets will need to monitor how political parties in Italy progress to form government. Failure to form government would be considered negative for the majors.

Following the latest comments from both sides on Trade, any chatter from Beijing or the Oval Office will also need consideration…

In the futures markets, at the time of writing, the DAX was up by 9.5 points, while the Dow Mini was up by 69 points.

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