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Bob Mason
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Economic Calendar:

Thursday, 10th October

  • German Trade Balance (Aug)

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was back in the red for the majors on Tuesday, with the CAC40 sliding by 1.18% to lead the way. Things were not much better for the EuroStoxx600 and DAX30, which fell by 1.11% and by 1.05% respectively.

The losses came in spite of better than anticipated economic data out of Germany, with sentiment towards the trade war weighing.

Expectations of progress in trade talks between the U.S and China deteriorated as the markets reacted to news of the U.S including an additional 28 Chinese firms to the blacklist…

To make matters worse, there was some controversy over the ongoing Hong Kong protests. China broadcasters and media suspended the airing of NBA preseason games on Tuesday. The move came in response to the GM of the Houston Rockets, Daryl Morey, tweeting support for the pro-democracy protests.

When considering the fact that China has ramped up the import of U.S agricultural goods, there’s unlikely to be too much give should the U.S stand firm on tariffs, blacklisted companies, and Huawei…

The Stats

It was another quiet day on the Eurozone economic calendar on Tuesday. German industrial production figures for August provided direction in the early part of the day.

According to Destatis,

  • Month-on-month, industrial production rose by 0.3%, reversing a 0.4% fall in July. Economists had forecast a decline of 0.2%.
  • In August, the production of industry excl. energy and construction rose by 0.7%.
  • Within industry, the production of intermediate goods rose by 1% and by 1.1% for the production of capital goods.
  • The production of consumer goods fell by 1.0%, however.
  • Outside of industry, energy production slid by 1.7%, with the production of construction falling 1.5%.
  • Year-on-year, industrial production was down 4%.

From the U.S, wholesale inflation figures for September had a muted impact on the majors late in the day.

The Market Movers

For the DAX: It was yet another bearish day for the auto sector, with BMW (-1.12%), Continental (-0.59%), and Daimler (-0.49%) on the slide.  Volkswagen bucked the trend with a gain of 0.12%.

Bank stocks also struggled on the day, with Deutsche Bank sliding by a further 2.25%. Commerzbank fell by a more modest 1.62%

Leading the way down on the day, however, were Wirecard and Infineon Tech, which tumbled by 4.81% and by 3.59% respectively. The losses came in response to the shift in sentiment towards trade through the day.

From the CAC, it was not much better for the banks. Soc Gen led the way down, sliding by 1.72%. Credit Agricole and BNP Paribas saw more modest losses of 1.55% and 0.68% respectively. For the autos, Renault fell by just by 0.04%, while Peugeot tumbled by 2.81%.

On the VIX Index

The VIX Index saw further upside on Tuesday, rising by 13.55%. Following a 4.81% gain on Monday, the VIX ended the day at 20.3.

Risk aversion hit the majors on Tuesday as the markets reacted to the news from the U.S on the blacklisting of Chinese firms.

Expectations of progress in trade talks had supported the majors going into this week. It’s not the first time that the U.S has made an antagonistic move ahead of trade talks…

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

From the U.S, JOLT’s job opening figures are due out that could influence should there be a sizeable fall in quit rates. Barring dire quit rates and an unexpected slide in job openings, the numbers are unlikely to impact.

With stats on the lighter side through the day, market sentiment towards the U.S – China trade talks will be key. High-level trade talks are set to resume, but with the U.S administration blacklisting more Chinese companies, China may not be as receptive to U.S demands.

Expect any updates from Washington to have a material influence on risk appetite on the day.

In the futures market, at the time of writing, the DAX30 was 4 points, with the Dow up by 44 points.

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