European Equities: No Stats and a Shortened Session to Test the Bulls

With the European and U.S majors hitting record highs over the holiday period, expectations of improved trade terms failed to deliver.

A stronger EUR and a continued contraction in Germany’s manufacturing sector remain issues for the Eurozone’s economy.

Expectations are for emerging economies to see the largest benefits from the phase 1 trade agreement, which could see some outflows going into 2020.

Much will depend on the details of the Phase 1 trade agreement that will likely emerge in the New Year.

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. 3^rd quarter GDP data and prelim December inflation figures from Spain were the only stats in focus on the day.

With the German markets on a shortened day, the release of retail sales figures, scheduled for release on Monday, was delayed.

The lack of material stats from the Eurozone left the CAC40 and EuroStoxx600 in the hands of risk sentiment and movement across the U.S majors.

From the U.S, November trade and pending home sales figures and December’s Chicago PMI were in focus.

The Goods trade deficit narrowed from $66.53bn to $63.19bn in November. Economists had forecast a deficit of $68.75bn.

From the private sector, the Chicago PMI rose from 46.30 to 48.9 in December, coming in ahead of a forecast of 48.0.

Pending home sales rose by 1.2%, which was in line with forecasts. In October, pending home sales had fallen by 1.3%.

The stats had a muted impact on the majors, however, with New Year jitters creeping in.

The Market Movers

For the DAX: It was a mixed start to the week for the auto sector. BMW and Daimler fell by 0.25% and 0.65% to lead the way down. Continental (+0.02%) and Volkswagen (-0.03%) closed out the day relatively flat.

It was also a bullish day for the banks. Commerzbank rose by 1.36%, while Deutsche Bank rising by 0.51%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 0.45% and by 0.34% respectively, while Credit Agricole fell by 0.65%.

It was also a bearish day for the French auto sector, with Peugeot and Renault falling by 1.15% and by 0.93% respectively.

On the VIX Index

The VIX rallied by 10.35% on Monday. Following on from a 6.17% gain on Friday, the VIX ended the day at $14.8.

A bearish day across the European and U.S majors supported the VIX, with the S&P500 falling by 0.58% on the day.

Profit-taking ahead of the New Year and anticipated details of the phase 1 trade agreement contributed to the upside in the VIX.

With phase 2 negotiations expected to begin in the New Year, it’s not clear how far the phase 1 agreement goes to support the global economy.

The Day Ahead

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

With the German market closed and the CAC40 and EuroStoxx600 on shortened sessions, volumes will be on the lighter side.

From the early part of the day, December private sector PMI numbers out of China failed to impress. While the manufacturing sector PMI beat forecasts by holding steady at 50.2, the services PMI fell from 54.4 to 53.5.

The service sector’s contribution to China’s economy is far more significant in recent years, which does make the markets more sensitive to the non-manufacturing sector.

In the futures markets, at the time of writing, the Dow was up by 37 points. It was less impressive across the Asian majors, however. The CSI300 bucked the trend early on, rising by 0.33%. The ASX200 led the way down, sliding by 1.67%.