European Equities: Geopolitics and Corporate Earnings in FocusWith no majors stats for the majors to consider, corporate earnings and Brexit remain in focus.
Wednesday, 30th October
- French GDP (QoQ) (Q3)
- French Consumer Spending (MoM) (Sep)
- Spanish HICP (YoY) (Oct)
- German Unemployment Change / Rate (Oct)
- German CPI (MoM) (Oct)
Wednesday, 30th October
- German Retail Sales (MoM) (Sep)
- Spanish GDP (QoQ) (Q3)
- Italian CPI (MoM) (Oct)
- Eurozone CPI (YoY) (Oct) Prelim
- Eurozone Unemployment Rate (Sep)
It was a bullish end to the week for the European majors, with the CAC40 rising by 0.67% to lead the way. The EuroStoxx600 and DAX30 saw more modest gains of 0.16% and 0.17% respectively.
Economic data had a muted impact on the majors at the end of the week as the markets responded to positive updates from Washington on trade talks.
Support also came from U.S corporate earnings on the day.
The upside was limited, however, following the EU’s decision to delay the approval of Britain’s request to extend Britain’s withdrawal until 31st January 2020.
It a busy day on the Eurozone economic calendar on Friday. Key stats from the Eurozone included prelim business and consumer sentiment figures out of Germany.
Germany’s GfK Consumer Climate Index fell from 9.8 to 9.6 in November, to its lowest level since November 2016. Economists had forecast the index to hold steady at 9.8.
According to the October GfK Report,
- Both economic and income expectations, as well as propensity to buy hit reverse.
- While sentiment towards the global economy, trade conflicts, and Brexit continued to weigh, increasing reports of job losses added to the dampening mood.
- The economic expectation indicator fell by 4.8 points to -13.9, the lowest level since December 2012.
- Income expectations saw a more marked deterioration, with the indicator falling by 7.8 points to 39, the lowest level since December 2013.
- The propensity to buy index fell by 3.4 points to 51.7, which continued to defy the negative sentiment towards the economy and income expectations.
On the business sentiment front, the Ifo Business Climate Index held steady at 94.6, which was better than a forecasted fall to 94.5.
According to the latest Ifo report,
- Companies’ assessment of the current situation fell from 98.5 to 97.8, while expectations improved, with the expectations sub-index rising from 90.9 to 91.5.
- Sentiment amongst manufacturing companies improved, with the business climate index rising from -6.4 to -5.5, bringing to an end a run of 4 consecutive monthly declines.
- Manufacturing companies were less pessimistic about the economic outlook but were less positive about the current situation.
- Service sector sentiment held steady, with the index falling from 16.7 to 16.6, while the business climate in trade improved marginally, the index rising from -3.7 to -3.3. The upside in trade came from improved economic expectations amongst wholesale companies. Both retail and wholesale companies were less positive about the current economic situation, however.
The Market Movers
For the DAX: It was a mixed day for the auto sector. Continental led the way, rallying by 2.37%. BMW and Daimler also found support, rising by 1.25% and by 0.55% respectively. Volkswagen bucked the trend on the day, with a 1.19% loss.
It was also a mixed day for the banks, with Commerzbank falling by 0.18%, while Deutsche Bank gained 0.51%.
From the CAC, it was also a mixed day for the banks. BNP Paribas fell by 0.28%, while Credit Agricole and Soc Gen rose by 1.4% and by 0.08% respectively. For the autos, Peugeot fell by 0.80%, while Renault found much-needed support, rising by 0.15%.
On the VIX Index
The VIX Index saw red for a 3rd consecutive day on Friday, falling by 7.73%. Following a 2.14% loss on Thursday, the VIX ended the day at 12.7.
While uncertainty over Brexit provided support, the downside ultimately came from U.S corporate earnings and positive updates from the U.S and China on trade.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats on the day to provide the majors with direction.
From the U.S September’s goods trade data is unlikely to influence later in the day, leaving the majors in the hands of sentiment towards monetary policy and Brexit.
While the markets will be looking ahead to the FED’s interest rate decision on Wednesday, ECB President Draghi is scheduled to speak at the end of the session.
Following last week’s press conference, however, there’s unlikely to be too much influence.
On the geopolitical risk front, both Beijing and Washington will need to continue to deliver positive messages to support the majors.
Brexit will likely take center stage in the early part of the week, following the EU’s delaying of its Brexit extension decision until this week.
While an extension was agreed by the 27 member states, the length of the extension and structure was in debate.
On the corporate earnings front, while there are no marquee names delivering results, expect influence on the day.
In the futures market, at the time of writing, the DAX30 was up by 14 points, with the Dow up by 52 points.