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Bob Mason
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Economic Calendar:

Monday, 24th June

  • German IFO Current Conditions / German IFO Expectations / German IFO Business Climate

Wednesday, 26th June

    • GfK German Consumer Climate (Jul)

      Thursday, 27th June

  • Spanish HICP (YoY) (Jun)
  • Eurozone Business Confidence
  • German CPI (MoM) (Jun) Prelim

Friday, 28th June

  • French Consumer Spending (MoM) (May)
  • French CPI (MoM) (June) Prelim
  • French HICP (MoM) (June) Prelim
  • Spanish GDP (QoQ) (Q1)
  • Italian CPI (MoM) (Jun) Prelim
  • Eurozone Core CPI (YoY) (Jun) Prelim
  • Eurozone CPI (YoY) (Jun) Prelim

The Majors

The European majors ended the week on the back foot. The DAX30 and CAC40 both fell by 0.13%, while the EuroStoxx600 fell by 0.36%.

It was a bullish week, however. The CAC40 led the way, rallying by 2.99% with the DAX30 ending the week up by 2.01%. The EuroStoxx600 trailed with a 1.57% gain.

News of a planned meeting between Trump and Xi at the coming week’s G20 Summit provided support through the week.

Adding to the upside was a dovish FED and some ECB President jawboning mid-week. 7 FOMC members projected 2 rate cuts for the year. ECB President Draghi also assured the markets of ECB support should inflationary pressures fail to build.

Rising tensions between the U.S and Iran weighed on risk appetite at the end of the week, however. News of Trump pulling out from a military strike on Iran at the 11th hour raised the prospects of military action in the near-term.

A lack of support from allies left the U.S President isolated, with few world leaders wanting to be embroiled in a conflict with Iran.

Trump has now promised tougher sanctions to bring the country to its knees. It remains to be seen how Iran responds…

The Stats

Economic data out of the Eurozone was on the heavier side on Friday.

June prelim private sector PMI numbers provided some direction in the early part of the day.

The numbers were skewed to the positive side on Friday.

The Eurozone’s manufacturing PMI rose from 47.7 to 47.8, with the services sector rising from 55.4 to 55.6. The upward trends led to the composite rising from 51.8 to 52.1. According to the latest Eurozone Markit Composite,

  • While growth remained weak, the prelim PMI hit a 7-month high in June.
  • The service sector PMI activity index hit a 7-month high, while the manufacturing PMI output index hit a 2-month low.
  • In spite of the 2-month low, the manufacturing PMI hit a 2-month high.
  • While private sector activity picked up, optimism fell to its lowest level since late-2014.
  • Export orders for both goods and services fell to the weakest level since January.
  • On the positive labor market conditions improved.

From the U.S

From the U.S, the private sector PMI figures were less impressive. The services sector PMI fell from 50.9 to 50.7, with the manufacturing PMI falling from 50.5 to 50.1.

In spite of the negative sentiment towards the economic outlook, housing sector data was on the positive side. Existing homes sales rose by 2.5% in May, with falling mortgage rates providing support. 30-year fixed rates fell from 4.14% to 3.99% through the month.

The Market Movers

From the DAX, Wirecard led the way on the day, rising by just 0.67%. Continental ended the day flat from the auto sector, while BMW (-0.67%), Daimler (-0.41%), and Volkswagen (-0.24%) saw red on the day.

The banking sector saw red on the day, with Deutsche Bank and Commerzbank falling by 0.66% and by 0.18% respectively.

From the CAC, BNP Paribas slid by 0.89%, with Credit Agricole ending the day down by 0.62%. From the auto sector, Renault found strong support, rallying by 2.37% to buck the trend on the day.

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. There are no material stats due out of the U.S, leaving the markets to focus on German business sentiment figures.

If the prelim Composite PMI is anything to go by, the IFO Business Climate Index could surprise this morning. According to the Markit survey, while German service sector confidence fell to the lowest level since October 2014 confidence across the manufacturing sector improved in June.

Outside of the stats, any rising tensions between the U.S and Iran will need to be considered along with any chatter on trade.

At the time of writing, the DAX was down by 45 points. The Dow Mini was up by 51 points.

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