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Bob Mason
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Economic Calendar:

Friday, 4th September

German Factory Orders (MoM) (Jul)

German IHS Markit Construction PMI (Aug)

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The Majors

It was a bearish day for the European majors on Thursday. Both the DAX30 and the EuroStoxx600 fell by 1.40% to lead the way down. The CAC40 saw a more modest 0.44% loss on the day.

A falling EUR was not enough to prevent a pullback in the majors that had enjoyed early gains on Thursday.

From the Eurozone, private sector PMI figures for August reflected the effect of the recent spike in new COVID-19 cases in Europe.

The latest PMIs suggested that the wind may have come out of the sails of the V-shaped economic recovery.

Both Italy and Spain saw their respective service sectors contract. The PMIs showed that all of the member states surveyed saw a marked slowdown in private sector growth in August.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Key stats included service and composite sector PMIs for Italy and Spain and retail sales figures for the Eurozone.

Finalized service and composite PMIs for France, Germany, and the Eurozone were also in focus.

The PMIs

In August, Spain’s Services PMI fell from 51.9 to 47.7. Economists had forecast a slide to 48.0.

Italy’s Services PMI declined from 51.6 to 47.1, which was worse than a forecasted 49.2.

The finalized French PMI came in at 51.5, which was down from a prelim 51.9, while Germany’s came in at 52.5. This was up from a prelim 50.8. In Jul, the PMIs had stood at 57.3 and 55.6 respectively.

For the Eurozone, the August services PMI came in at 50.5, which was up from a prelim 50.1% while down from a July 54.7.

The Eurozone’s composite PMI came in at 51.9, which was up from a prelim 51.6. In July, the PMI had stood at 54.9.

According to the Eurozone’s August Composite Markit Survey,

  • The private sector recovery lost momentum as growth eased markedly on July’s peak.
  • While the manufacturing sector output rose at the fastest pace since Apr-18, the rate of growth in the services sector eased sharply.
  • Germany was the best performer, supported by a strong performance in the manufacturing sector.
  • Ireland and France also recorded gains, though France saw the rate of expansion come in much slower than in July.
  • Subdued service sector performances meant that Italy and Spain recorded outright declines in private sector activity.
  • While new business increased for a 2nd consecutive month, new export sales reportedly declined again. The decline extended the period of contraction to nearly 2-years.
  • Companies again made cuts to employment numbers in August, extended the current period of contraction to 6-months.
  • Looking to the year ahead, business confidence remained in positive territory. Sentiment was slightly lower than in July, however.

Other stats

July retail sales fell by 1.3% in the Eurozone, partially reversing a 5.7% jump in June. Economists had forecast a 1.5% rise.

From the U.S

Initial jobless claims came in at 881k for the week ending 28th August. In the week prior, claims had stood at 1,011k. Economists had forecast 950k.

From the private sector, the market’s preferred ISM Non-Manufacturing PMI fell from 58.1 to 56.9. Economists had forecast a decline to 57.0.

Other stats included the finalized Markit PMIs for August, trade data, and 2nd quarter unit labor costs and productivity figures. The stats had a muted impact on the majors, however.

Ahead of the European open, China’s Caixin Services PMI came in at 54.0, which was down marginally from 54.1 in July. The number was good enough to support the European majors early in the day.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Volkswagen rose by 0.27% to buck the trend on the day. BMW and Daimler slid by 1.83% and by 1.47% respectively, however, with Continental falling by 0.20%.

It was a bearish day for the banks. Deutsche Bank declined by 1.61%, with Commerzbank seeing a 0.48% loss on the day.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 0.75, with Credit Agricole and Soc Gen seeing more modest gains of 0.02% and 0.23% respectively.

It was also a bullish day for the French auto sector. Peugeot rose by 2.58%, with Renault rallying by 3.22%.

Air France-KLM ended a run of 3 consecutive days in the red, with a 2.98% gain, while Airbus SE slipped by 0.80%

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Thursday. Following on from a 1.72% gain on Wednesday, the VIX jumped by 26.46% to end the day at 33.6.

The upside came as the U.S majors hit reverse on Thursday, with tech stocks weighing heavily on the day.

It was deep red for the NASDAQ, which tumbled by 4.96%, with the S&P500 and the Dow sliding by 3.51% and by 2.78% respectively.

The Day Ahead

It’s a quieter day ahead on the Eurozone economic calendar. Key stats include German factory orders for July and construction PMI for August.

With stats on the lighter side, expect the factory order numbers to have an impact ahead of a busy U.S session.

From the U.S, it’s nonfarm payrolls and the unemployment rate that will influence the European majors later in the day.

Also, expect some sensitivity to the EUR throughout the European session.

The Futures

In the futures markets, at the time of writing, the Dow was down by 67 points.

For a look at all of today’s economic events, check out our economic calendar.

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