European Equities: Manufacturing PMIs and Geopolitics in Focus

It’s a busy day ahead, with manufacturing PMI numbers from China, the Eurozone, and the U.S in focus. Stats from the weekend provided early support.
Bob Mason
Businessman touching stock market graph on a virtual screen display.

Economic Calendar:

Monday, 2nd December 2019

  • Spanish Manufacturing PMI (Nov)
  • Italian Manufacturing PMI (Nov)
  • French Manufacturing PMI (Nov) Final
  • German Manufacturing PMI (Nov) Final
  • Eurozone Manufacturing PMI (Nov) Final

Tuesday, 3rd December 2019

  • Spanish Unemployment Change

Wednesday, 4th December 2019

  • Spanish Services PMI (Nov)
  • Italian Services PMI (Nov)
  • French Services PMI (Nov) Final
  • German Services PMI (Nov) Final
  • Eurozone Markit Composite PMI (Nov) Final
  • Eurozone Services PMI (Nov) Final

Thursday, 5th December 2019

  • German Factory Orders (MoM) (Oct)
  • Eurozone GDP (QoQ) (Q3) 3rd Estimate
  • Eurozone GDP (YoY) (Q3) 3rd Estimate
  • Eurozone Retail Sales (MoM) (Oct)

Friday, 5th December 2019

  • German Industrial Production (MoM) (Oct)

The Majors

It was a day in the red for the European majors on Friday, with the EuroStoxx600 falling by 0.44% to lead the way down. The DAX30 and CAC40 saw more modest losses of 0.07% and 0.13% respectively.

News of U.S President Trump signing the HK Bill in the early hours of Thursday morning continued to pressure the markets.

China had yet to retaliate against Trump’s latest move that could materially impact progress towards a phase 1 trade agreement.

The Stats

It was a busy day on the Eurozone economic calendar on Friday. Key stats included retail sales and unemployment figures out of Germany and French GDP and consumer spending figures.

From  Germany, the stats were mixed on the day. Retail sales slid by 1.9% in October, reversing a 0.1% gain from September. Unemployment fell by 16k in November, however, which was better than a forecasted 5k rise.

The numbers will have eased concerns over labor market conditions, which should support confidence and a rebound in spending.

Out of France, the finalized GDP came in at 0.3%, which was in line with prelims. Consumer spending disappointed, however, with a 0.2% rise coming up short of a forecasted 0.3% increase. In September, spending had fallen by 0.3%.

Of less influence on the day were prelim November inflation figures out of France, Italy and the Eurozone.

There were no material stats from the U.S to provide direction. With the U.S markets on a half-day, volumes were on the lighter side late in the session.

The Market Movers

For the DAX: It was another bearish day for the auto sector. Continental slid by 1.79% to lead the way down. Daimler and Volkswagen were also amongst the worst performers, with losses of 1.52% and 0.84% respectively. BMW saw a more modest loss of 0.65% on the day.

It was also a bearish day for the banks. Deutsche Bank fell by 0.76%, with Commerzbank down by 0.21%.

From the CAC, it was a mixed day for the banks. Soc Gen bucked the trend on the day, rising by 0.76%. BNP Paribas and Credit Agricole fell by 0.14% and 0.56% respectively.

It was also a mixed end to the week for the French Auto sector, with Peugeot falling by 1.44%, while Renault gained 0.35%.

On the VIX Index

After the market close on Thursday, the VIX rose by 7.4% to end the week at 12.6.

Market reaction to Trump’s signing of the HK Bills weighed on risk appetite at the end of the week, providing the VIX with support.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include Spanish and Italian manufacturing PMI numbers for November. Finalized manufacturing PMIs are also due out of France, Germany, and the Eurozone.

Barring deviation from prelim figures, the focus will be on Italy and the Eurozone’s PMI numbers.

From the U.S, the ISM Manufacturing PMI for November will also provide direction late in the day.

From the weekend, China’s November NBS Manufacturing and Non-Manufacturing PMIs came in ahead of forecasts, which is market risk positive.

The Manufacturing PMI rose from 49.3 to 50.2, with the Non-Manufacturing PMI rising from 52.8 to 54.4.

Of greater influence, however, will be the Caixin Manufacturing PMI that is due out later this morning…

On the geopolitical risk front, any reaction from China on Trump’s signing of the HK Bill will be in focus, as will any updates from trade talks.

From the UK, with the opinion polls showing Boris Johnson’s lead crumble in the last week, the prospects of a hung parliament could also test the majors.

In the futures market, at the time of writing, the DAX30 was up by 39.5 points, with the Dow up by 77 points.

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