European Equities: No Major Stats Leaves Geopolitics in FocusPositive sentiment towards the U.S – China trade negotiations and the blocking of a no-deal Brexit are positives on a quiet day on the economic calendar.
Thursday, 25th October
- French Manufacturing PMI (Oct) Prelim
- French Services PMI (Oct) Prelim
- German Manufacturing PMI (Oct) Prelim
- German Services PMI (Oct) Prelim
- Eurozone Manufacturing PMI (Oct) Prelim
- Eurozone Markit Composite PMI (Oct) Prelim
- Eurozone Services PMI (Oct) Prelim
- ECB Deposit Facility Rate (Oct)
- ECB Interest Rate Decision (Oct)
Friday, 26th October
- GfK German Consumer Climate (Nov)
- German Ifo Business Climate Index (Oct)
The European majors found support on Monday, to partially reverse losses from the end of last week. Leading the way was the DAX30, which rose by 0.91%. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 0.21% and 0.61% respectively.
Economic data was on the lighter side on Monday, leaving geopolitics in focus at the start of the week.
UK Parliament voted to delay a meaningful vote on Boris Johnson’s Brexit deal on Saturday, leaving the British PM with little choice but to request another extension.
While the extension is expected to be approved by the EU, there’s still talk of Britain leaving the EU by Halloween.
On Monday, Boris Johnson failed once more to push through a debate on the latest agreement, leaving the Pound in limbo. While the latest news was negative, the request for an extension supported risk appetite on the day.
As far as the European markets were concerned, a no-deal Brexit appears to be averted, which provided support on the day.
It was a quiet day on the Eurozone economic calendar on Monday. Germany’s September wholesale inflation figures were the only stats for the markets to consider on the day.
According to Destatis,
- Producer prices rose by 0.1% in September, month-on-month, which was better than a forecasted 0.2% decline. In August, producer prices had fallen by 0.5%.
- Energy prices rose by 0.4%, while producer prices excl. energy fell by 0.1%.
- Prices of intermediate goods fell by 0.3%, while prices of non-durable consumer goods rose by 0.2%.
- There was also an increase in prices for durable consumer goods, which rose by 0.1%.
- Prices for capital goods remained unchanged in the month.
- Year-on-year, producer prices fell by 0.1%, following a 0.3% rise in August. Economists had forecast a 0.3% decline.
There were no material stats out of the U.S to test the majors late in the session.
The Market Movers
For the DAX: It was a bullish day for the auto sector. Continental led the day rising by 1.88%, with Daimler gaining 1.50%. Volkswagen and BMW saw more modest gains of 0.71% and 0.55% respectively.
Bank stocks were also on the move with Commerzbank and Deutsche Bank rallying by 5.32% and by 2.46% respectively.
Leading the way on the day, however, was Wirecard, which rallied by 5.59% on news of appointing KPMG to provide an independent audit. Wirecard had hit the news wires for the wrong reasons recently over its accounting practices.
From the CAC, it was also a positive day for the banks. Credit Agricole and Soc Gen rose by 2.12% and by 1.98% respectively. BNP Paribas wasn’t far behind, gaining 1.75%. For the autos, it was a less eventful day, with Peugeot and Renault rising by 0.34% and by 1.08% respectively.
On the VIX Index
It was back in the red for the VIX on Monday, bringing to an end a run of 3 consecutive days in the green. The VIX Index fell by 1.73%. Partially reversing a 3.34% rise from Friday, the VIX ended the day at 14.0.
The downside came despite Brexit woes, as British PM Boris Johnson failed for the 2nd time to get a meaningful vote on the new Brexit deal.
With no material stats to influence, corporate earnings results from the U.S, weighed on the VIX as the U.S majors also closed out the day in the green. Adding to the downside on the day was optimism on trade, as Trump talked up progress on trade talks.
The Day Ahead
It’s another quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction on the day.
The lack of stats will leave the markets to respond to events in the UK parliament on Monday. Positive comments from the U.S President on trade talks with China should also provide support.
Late in the session, economic data due out of the U.S is limited to September’s existing home sales figures that will likely be brushed aside by the markets.
On the earnings calendar, EU and U.S corporates are in focus this week, with a number of major U.S companies releasing earnings results.
From the DAX, Daimler is due to release its quarterly earnings results on Thursday. Amazon.com (Thurs), Boeing (Wed), Caterpillar (Wed), Ford Motor Co (Wed), Intel (Thurs), Microsoft (Wed), and Tesla Inc. (Wed) release earnings in the U.S.
In the futures market, at the time of writing, the DAX30 was up by 38 points, with the Dow up by 44 points.