European Equities: Geopolitics and U.S Stats to Influence

The Majors

It was a 2^nd consecutive day in the red for the European majors, with the DAX30 falling by 0.49% to lead the way down. The CAC40 and EuroStoxx600 saw more modest losses of 0.15% and 0.13% respectively.

The reversal came in spite of better economic data out of Germany on the day.

Market jitters over the prospects of a no-deal Brexit continued to weigh on the majors on Wednesday.

The Stats

It was a busier day on the Eurozone economic calendar on Wednesday. Key stats included business sentiment figures out of Germany and finalized inflation figures for the Eurozone.

According to the Ifo’s December business survey,

• The Business Expectations Index rose from 92.3 to 93.8, with the Current Assessment Index rising from 98.0 to 98.8.
• There was a recovery in the manufacturing sector reported, with companies’ considerably less pessimistic. By contrast, however, their assessment of their current situation worsened marginally.
• Manufacturers were reportedly planning for production cutbacks, while also noting it being harder to access credit.
• The service sector indicator hit its highest level in 6-months, with companies more satisfied with their current situation. Service sector firms were also cautiously optimistic over their business outlook.
• For the manufacturing sector, the Business Climate Index rose from -5.8 to -5.0, while the services sector index rose from 17.4 to 21.3.

On the inflation front,

• The Eurozone’s annual rate of core inflation stood at 1.3% in November, which was in line with prelim and forecasts. In October, the annual rate of core inflation had stood at 1.1%.
• Month-on-month, consumer prices fell by 0.3%, however, reversing a 0.1% increase in October.
• The annual rate of inflation came in at 1.0%, which was in line with prelim and forecasts. In October, the annual rate of inflation had come in at 0.7%.

According to Eurostat,

• Italy, Portugal (both 0.2%) and Belgium (0.4%) registered the lowest annual rates of inflation.
• Slovakia registered the highest annual rate of inflation at 3.2%.
• The highest contribution to the annual rate of inflation came from services (+0.82 pp), food, alcohol & tobacco (+0.37 pp), non-energy industrial goods (+0.10 pp).

From the U.S

There were no material stats to provide the majors later in the day…

The Market Movers

For the DAX: It was another mixed day for the auto sector. BMW bucked the trend on the day, rising by 0.21%. It was bearish for the rest, however. Continental, Daimler, and Volkswagen fell by 1.51%, 1.41% and by 0.72% respectively.

It was also a mixed day for the banks. Commerzbank rose by 0.29%, while Deutsche Bank fell by 0.11%.

From the CAC, it was a bullish day for the banks. Soc Gen led the way, rising by 0.50%. BNP Paribas and Credit Agricole saw more modest gains of 0.36% and 0.27% respectively.

It was mixed for the French auto sector, however, with Peugeot rising by 1.36%, whilst Renault fell by 0.17%.

On the VIX Index

The VIX saw a 2^nd consecutive day in the green on Wednesday, rising by 2.36%. Following on from a 1.24% gain on Tuesday, the VIX ended the day at $12.6.

Market jitters over a hard Brexit and a slight pullback on Trump’s impeachment provided the upside on the day.

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.

A lack of stats will leave the majors in the hands of geopolitics ahead of key stats from the U.S.

On the geopolitical front, expect further pressure in the day ahead as Boris Johnson looks to hasten Britain’s departure from the EU. There’s also the small matter of Trump’s impeachment to consider.

From the U.S, the Philly FED Manufacturing Index and weekly jobless claims figures will likely have an impact late in the European session.

In the futures markets, at the time of writing, the DAX30 was down by 12.5 points, with the Dow down by 16 points.