Futures point to another slow start to the day. With all eyes on the FED and no material stats to distract, it could be a testy day ahead.
The European majors found their wings on Tuesday. The CAC40 rallied by 2.2%, following a 0.43% gain on Monday to lead the way. The DAX30 and EuroStoxx600 weren’t far behind with gains of 2.03% and 1.67% respectively.
It was a double whammy for the majors on the day. Talks of further monetary policy stimulus spurred on the majors early on in the European session. The CAC40 and DAX30 bounced back from early losses off the back of ECB President Draghi commenting on the ECB’s willingness to deliver more monetary policy support should inflation fail to pick up.
The expectation of a dovish FED and a more willing ECB were both positives on the day. Hopes of progress on trade talks between the U.S and China was also positive. News of Trump and Xi’s planned meeting at the G20 Summit certainly contributed to the upside on the day.
Economic data out of the Eurozone was on the heavier side on Tuesday.
Germany and the Eurozone’s economic sentiment figures and the Eurozone’s inflation and trade data provide direction early on in the day.
According to the latest ZEW survey, the German economic sentiment index fell from -2.1 to -21.1 in June. The current conditions index was also in decline, falling from 8.2 to 7.8. The Eurozone economic sentiment index fell from -1.6 to -20.2.
From the Eurozone, the trade surplus narrowed from €22.5bn to €15.7bn in April. According to figures released by Eurostat,
Of less influence were the Eurozone’s finalized inflation figures, which were in line with prelim and forecasts.
According to finalized numbers, the Eurozone’s annual rate of core inflation also eased back from 1.3% to 0.8% in May.
From the DAX, Lufthansa was the worst performer for a 2nd consecutive day, sliding by 1.73%, with only a handful of stocks in the red on the day.
Leading the way on the day was ThyssenKrupp which rallied by 4.02%.
Deutsche Bank and Commerzbank also found strong support, surging by 3.62% and 1.82% respectively. The auto sector also benefited from the shift in sentiment. Continental led the way, rallying by 2.15%. BMW (+1.93%), Daimler (+1.97%) and Volkswagen (+1.70%) weren’t far behind.
From the CAC40, Renault bucked the trend, sliding by 2.6%. The rest of the components ended the day with solid gains. From the banking sector, BNP Paribas and Credit Agricole rose by 1.82% and by 1.35% respectively.
Economic data is on the lighter side in the day ahead. German wholesale inflation figures are due out that will likely have a muted impact on the majors.
We will expect the European majors to tread carefully ahead of the FED interest rate decision, economic projections and press conference. The European markets will close ahead of the FED decision.
With no stats due out of the U.S, the markets will have little else to focus on through the latter part of the day.
U.S President Trump has already attempted to swing the vote in favor of a rate cut. It’s unlikely to have an influence, however, with FED impartiality key.
At the time of writing, the DAX was down by 1.5 points. The Dow Mini was up by 16 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.