European Equities: Manufacturing Sector PMIs Are in Focus

Manufacturing PMIs are in focus later this morning. If China’s figures are anything to go by, then it would be bearish for the majors.
Bob Mason
worker with fork pallet truck

Economic Calendar:

Thursday, 2nd January 2020

Spanish Manufacturing PMI (Dec)

Italian Manufacturing PMI (Dec)

French Manufacturing PMI (Dec) Final

German Manufacturing PMI (Dec) Final

Eurozone Manufacturing PMI (Dec) Final

Friday, 3rd January 2020

German Unemployment Change and Rate (Dec)

German CPI (MoM) (Dec)

The Majors

It was a bearish day for the European majors on Tuesday, with the CAC40 and EuroStoxx600 falling by 0.07% and 0.08% respectively. It was a 2nd day in the red, leaving the EuroStoxx600 and CAC40 down by 0.93% and by 0.98% respectively for the week. The German markets were closed on Tuesday.

Profit-taking and a lack of key data on a shortened trading session left the majors with a lack of direction on the day.

In spite of the pullback on the final day of the year, it was a bullish year for the European majors. The CAC40 and DAX30 rose by 26.37% and by 25.48% to lead the way, with the EuroStoxx600 seeing a more modest, but still noteworthy, 23.03% gain.

A disappointing December left the DAX30 trailing the CAC40. The DAX30 rose by just 0.1% compared with a 1.23% gain for the CAC40. The EuroStoxx600 led the way in December, however, rallying by 2.06%.

The Stats

It was a quiet day on the Eurozone economic calendar on Tuesday. There were no material stats to provide the majors with direction on the day.

From the U.S, stats were released after the European close, leaving the majors unaffected by weaker than expected consumer sentiment figures.

The Market Movers

For the DAX: No trading on Tuesday.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.19% and by 0.13% respectively, while Credit Agricole fell by 0.08%.

It was a bearish day for the French auto sector, however, with Peugeot and Renault falling by 1.25% and by 0.99% respectively.

On the VIX Index

The VIX fell by 7.02% on Tuesday. Partially reversing a 10.35% rally on Monday, the VIX ended the day at $13.8

A positive end to the day for the U.S majors left the VIX in the red, with a late pullback seeing the VIX give up 15 levels.

The S&P500 had spent much of the day in the red, supporting the VIX before a late in the day rally.

While positive sentiment towards the phase 1 trade agreement provided support, plenty of uncertainty remains over what lies ahead.

Remaining tariffs and a full-blown trade agreement will be a must, though whether this is achievable before this year’s presidential election remains to be seen.

The Day Ahead

It’s a busy day on the Eurozone economic calendar. Key stats include December manufacturing PMI numbers out of Italy and Spain. Finalized manufacturing PMIs are also due out of France, Germany, and the Eurozone.

Barring deviation from prelim figures, Italy and the Eurozone’s manufacturing PMIs will have the greatest influence.

At the end of 2019, the ECB’s final economic bulletin of the year suggested that the manufacturing sector had bottomed out. The numbers will need to support that theory for the European majors to kick off the year on a positive footing.

From the early part of the day, China’s Caixin Manufacturing PMI came in at 51.5, falling from a November 51.8. While output continued to rise strongly, new orders and hiring stagnated in December, which will be of concern.

Later in the day, finalized December manufacturing PMI figures from the U.S should have a muted impact.

In the futures markets, at the time of writing, the DAX was down by 61 points. The Dow was up by 71 points.

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