It's a relatively quiet day on the economic data front, which could test market resolve. There's a lot riding on a dovish ECB...
It was a 4th consecutive day in the green for the DAX30 on Monday. Following last week’s gains, the DAX30 led the way on Monday, rising by 0.28%. Support for the DAX30 came off the back of better than expected July trade data out of Germany and from talk of a German fiscal stimulus package.
Seeing red, however, were the CAC40 and EuroStoxx600, which fell by 0.27% and 0.28% respectively.
Uncertainty over what stimulus the ECB will deliver on Thursday and how far the FED will go next week left the markets in limbo.
On the geopolitical front, Brexit and political chaos in the UK were also in focus, testing market risk appetite on Monday.
It was a relatively quiet day on the Eurozone economic calendar on Monday. July trade data, out of Germany provided direction in the early part of the day.
According to Destatis,
From the U.S, there were no material stats to influence later in the day.
From the DAX, the auto sector was amongst the best performers on the day. Continental led the way, rallying by 3.95%. Volkswagen (+2.54%), Daimler (+2.22%), and BMW (+1.76%) were also at the top of the table.
Bank stocks joined auto stocks on the day, with Deutsche Bank and Commerzbank rallying by 3.75% and 3.44% respectively.
From the CAC, it was a bullish day for the banks. Soc Gen led the way, rallying by 4.10%. BNP Paribas and Credit Agricole gained 2.97% and 2.75% respectively. It was also a solid day for the auto sector, Renault rose by 2.25%, with Peugeot gaining 3.48%.
It was a 1st day in the green in 5 for the VIX Index, which rose by 2% to end the day at 15.3.
With economic data on the lighter side on the day, market uncertainty over monetary policy and a lack of chatter on trade led to the gain on the day.
It’s a relatively quiet day ahead on the Eurozone economic calendar. 2nd quarter non-farm payroll figures are due out of France. Barring particularly dire numbers, the figures will likely have a muted impact on the majors.
The lighter day on the stats will give French and Italian industrial production figures greater weighting.
From the U.S, stats are also on the lighter side, with economic data limited to July’s JOLTs job openings. Following disappointing August nonfarm payroll figures on Friday, we can expect the numbers to have an impact late in the session.
Outside of the stats, geopolitical risk will continue to provide direction through the day. UK politics and Brexit will likely be the main area of focus.
On the monetary policy front, uncertainty over how far the ECB will go also needs considering. The markets are expecting the kitchen sink and the ECB may not be yet willing to throw in the last of its ammunition just yet.
The good news is that the German government’s latest steps to shore up the economy could spur a wave of fiscal stimulus programs. Draghi will finally get his wish. The ECB President had called on governments to deliver stimulus for years.
In the futures markets, at the time of writing, the DAX was up by 21 points, with the Dow Mini was up by 52 points.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.