European Equities: It’s Looking Dicey Ahead of the Open

Risk aversion hit the Asian markets early, pulling the European and U.S futures into the red. Bond yields did the damage, as bond yields tumbled.
Bob Mason

Economic Calendar:

Monday, 25th March 2019

  • Business Expectations
  • Current Assessment
  • Ifo Business Climate Index

Tuesday, 26th March 2019

  • GfK German Consumer Climate (Apr)
  • French GDP q/q (Q4)
  • French GDP y/y (Q4))

Wednesday, 27th March 2019

  • ECB President Draghi Speaks

Thursday, 28th March 2019

  • Spanish CPI y/y (Mar) Prelim
  • Spanish HICP y/y (Mar) Prelim
  • German CPI m/m (Mar) Prelim

Friday, 29th March 2019

  • German Retail Sales m/m (Feb)
  • French Consumer Spending m/m (Feb)
  • French CPI m/m (Mar) Prelim
  • French HICP m/m (Mar) Prelim
  • Spanish GDP q/q (Q4)
  • German Unemployment Change (Mar)
  • German Unemployment Rate (Mar)
  • Italian CPI m/m (Mar) Prelim

The Majors

The European majors are coming off the back of a bearish end to the week of the 18th. Economic data out the Eurozone and March private-sector PMIs, in particular, did little to ease concerns over the economic outlook.

Following the FED’s decision to hit pause on rate hikes throughout the remainder of the year and the stats, U.S Treasuries and European government bond yields have certainly found their vim.

A yield curve inversion between 3-month and 10-year U.S Treasury yields on Friday added to the doom and gloom sentiment.

The scene is certainly set for the week ahead.

Looking at the Asian markets this morning, it’s a sea of red and the futures markets are suggesting more pain ahead in Europe and the U.S markets later today.

The Day Ahead

Economic data scheduled for release out of the Eurozone is on the lighter side this morning. Ifo Business Climate Index figures are due out of Germany.

While the focus will be on the headline number, which is forecasted to deliver a boost, the figures are unlikely to materially shift sentiment towards the economic outlook.

We would expect the key driver through the day to be the yield curve, with the markets likely to play heavy attention to the bond markets. A light economic calendar at the start of the week won’t be of much help in a week where U.S GDP numbers are expected to be revised downwards by a significant proportion.

Not even the Robert Mueller Special Counsel investigation findings will be of much comfort. The markets were not expecting any findings against the U.S President. After all, the Special Counsel would have subpoenaed Trump at the very least, had the special counsel uncovered sufficient evidence.

At the time of writing, the DAX30 and CAC40 futures were in the red, tracking the U.S futures market. Gains earlier in the Asian session have reversed and we’re set up for a bearish day ahead. Even a softer EUR will be of little comfort at the open.

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