A bounce-back could be on the cards, though much will depend on chatter from the Middle East and economic data from the U.S...
Eurozone CPI (YoY) (Dec) Prelim
Eurozone CPI Core (YoY) (Dec) Prelim
Eurozone Retail Sales (MoM) (Nov)
German Factory Orders (MoM) (Nov)
German Industrial Production (MoM) (Nov)
German Trade Balance (Nov)
Eurozone Unemployment Rate (Nov)
ECB Monetary Policy Meeting Minutes
It was a bearish start to the week for the European majors, with the DAX30 falling by 0.70% to lead the way down on the day. The CAC40 and EuroStoxx600 saw more modest losses of 0.51% and 0.41% respectively.
It could have been far worse on the day, with the DAX30 having fallen by as much as 2.05% before finding support.
Rising tension between the U.S and Iran, following Thursday night’s drone attack, continued to weigh on the majors.
In spite of the risk aversion through the early part of the day, the U.S majors bounced back to close out the day in positive territory.
Positive sentiment towards the U.S economic outlook overshadowed the negative sentiment towards tensions in the Middle East. Things could change rapidly should Iran retaliate, however…
It was a busy day on the Eurozone economic calendar on Monday. Key stats included German retail sales figures for November and December service sector PMI numbers for Italy and Spain. Finalized PMI numbers for France, Germany and the Eurozone were also in focus alongside the composite PMIs.
The Services PMI rose from 53.2 to 54.9 in December, coming in ahead of a forecasted 53.9.
The Service PMI increased from 50.4 to 51.1 in December, coming in ahead of a forecasted 51.0.
Retail sales jumped by 2.1% in November, month-on-month, reversing a revised 1.3% slide in October. According to Destatis,
Germany’s Service PMI came in at 52.9 for December, coming in ahead of a prelim and forecast of 52.0. In November the PMI had stood at 51.7.
The Service PMI came in at 52.4 for December, which was also in line with prelim and forecasts. In November, the PMI had stood at 52.2.
The Composite PMI came in at 50.9 for December, coming in ahead of a prelim and November 50.6.
According to the December Markit survey,
The finalized Markit service sector and composite PMI figures for December were positive, with the services PMI rising from 51.6 to 52.8 in December. An upward revision from a prelim 52.2 supported the more hawkish sentiment towards the U.S economic outlook going into 2020.
For the DAX: It was a mixed day for the auto sector. Continental and Daimler saw further losses, falling by 0.70% and by 0.05% respectively. BMW and Volkswagen bucked the trend, rising by 0.05% and by 0.52% respectively.
It was a bearish day for the banks, however. Commerzbank slid by 3.13%, with Deutsche Bank falling by 0.99% on the day.
From the CAC, it was also a bearish day for the banks. Credit Agricole and Soc Gen fell by 0.99% and by 0.81% respectively. BNP Paribas saw a more modest 0.49% loss on the day.
For the French auto sector, it was also a mixed day, with Peugeot falling by 1.59%, while Renault gained 0.32%.
Airline stocks continued to struggle at the start of the week. On the DAX30, Deutsche Lufthansa fell by a further 0.93% following Friday’s 6.45% slide. Air France – KLM declined by 0.93% following Friday’s 7.92% tumble.
Oil prices continued to rise on Monday in spite of risk aversion easing through the day, which pressured airline stocks further.
France’s Total rallied by 1.45% following a 1.13% gain from Friday.
The VIX fell by 1.21% on Monday. Partially reversing a 12.43% surge from Friday, the VIX ended the day at 13.9.
It was a mixed day for the VIX, which struck a day high 16.4 before hitting reverse. A shift in focus from Iran to the economic outlook led to a reversal on the day, which supported gains for the U.S equity markets.
It’s a relatively quiet day on the Eurozone economic calendar. Key stats include prelim inflation figures for the Eurozone.
We would expect the numbers to have a muted impact on the majors, however, with geopolitics and U.S stats likely to have a greater impact.
From the U.S, the markets’ preferred ISM Non-Manufacturing PMI for December and November factory order figures are due out.
Outside of the numbers, expect the Middle East to continue to draw attention. Iran has cranked up enrichment and the U.S is suggesting that ballistic missiles are at the ready. Perhaps an excuse for strategic airstrikes that would certainly see the majors return to the red…
The good news at the start of the week was that Iran had yet to retaliate to the U.S airstrike. It was Soleimani’s funeral, however, with little likely to happen until after he is laid to rest…
In the futures markets, at the time of writing, the DAX30 was up by 67 points, with the Dow up by 36 points.
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.