European Equities: PMI Numbers and ECB Minutes in Focus

The Majors

It was a bullish day for the European majors on Wednesday, with the CAC40 leading the way with a 1.7% gain. The DAX30 and EuroStoxx600 weren’t far behind, rising by 1.3% and by 1.21% respectively.

Market sentiment towards FED monetary policy fuelled the rally on the day as the markets awaited the release of the FOMC meeting minutes.

On the political front, Conte’s resignation and the beginning of talks between Italy’s President and party leaders seemed to settle the Italian market, supporting the 600.

From the U.S, Trump delivered a mixed bag for the markets to consider. The markets were able to brush aside Trump’s unwillingness to make a trade deal with China. It was nothing new to rile the markets. On the positive, Trump intimated that more reforms, in the form of tax cuts, were on the horizon to boost economic growth.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday. There were no material stats out of the Eurozone to provide direction.

With stats out of the U.S limited to housing sector data, the markets looked ahead to the FOMC meeting minutes that were due out after the European close.

Late in the U.S session, the FOMC meeting minutes failed to point to further rate cuts down the road. The rate cut was described as a recalibration of the stance of policy or mid-cycle adjustment. The move was in response to the shift in the global economic outlook.

The minutes also noted that there is no pre-set course. Incoming data and the anticipated impact on the economic outlook would guide the Committee.

In spite of the rate cut, the minutes also revealed that members noted that there had been some improvement in economic conditions. It was also noted that, while the overall outlook remained favorable, significant risks and uncertainties remained.

Members who voted in favor of the rate cut attributed the decision to better position the overall stance of policy to help counter the effects of weak global growth and trade policy uncertainty and to promote faster inflation.

Looking ahead to future adjustments, the Committee would assess realized and expected economic conditions relative to the Committee’s maximum employment and 2% inflation objectives.

The assessment would include the monitoring of:

• Labour market conditions.
• Indicators of inflation pressures and expectations.
• Readings on financial and international developments.

The Market Movers

From the DAX, the auto sector found strong support. Continental and Volkswagen were amongst the best-performing stocks on the day. The pair rose by 2.11% and 1.55% respectively. BMW and Daimler weren’t far behind, with gains of 1.53% and 1.45% respectively.

It was a mixed bag for the banking sector, however. Deutsche Bank rose by 0.94%, whilst Commerzbank fell by 0.51%.

From the CAC, it was a sea of green on the day, with no components closing out the day in the red. From the banking sector, Credit Agricole was the best performers on the day, rising by 0.39%. BNP Paribas and Soc Gen saw more modest gains of 0.19% and 0.07% respectively.

Renault was the story of the day, rallying by 3.77% on news that the merger with Fiat Chrysler remained possible. Peugeot gained just 0.42%.

The Day Ahead

It’s a particularly busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include August prelim private sector PMI numbers out of France, Germany, and the Eurozone. Later in the day, the ECB monetary policy meeting minutes are also due out.

While we will expect the markets to be particularly sensitive to Germany’s manufacturing PMI and the Eurozone’s Composite, the ECB monetary policy meeting minutes will also have a material impact on the day.

Following on from the FED’s meeting minutes released after the European close on Wednesday, expectations are for the ECB to follow the FED…

Going into the European open, expect the majors to respond to the FOMC meeting minutes. The minutes suggested a willingness to support should the need arise, but fell short of signaling any rate hikes.

From the U.S

August private sector PMI numbers and any chatter from the Jackson Hole Symposium will provide direction later in the day.

In the futures markets, at the time of writing, the DAX was up by 5 points, while the Dow Mini was up by 38 points.