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European Equities: Prelim January Private Sector PMIs to Test the Majors

The futures are pointing to a positive open, though the PMI numbers will need to provide support to avoid a reversal.
Bob Mason
Global financial markets

Economic Calendar:

Friday, 24th January 2020

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

German IFO Business Climate Index

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

ECB President Lagarde Speaks

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The Majors

It was yet another bearish day for the European majors on Thursday, with the DAX30 falling by 0.94% to lead the way down. The CAC40 and EuroStoxx600 weren’t far behind, with losses of 0.65% and 0.71% respectively.

Negative sentiment towards the coronavirus and market reaction to the ECB press conference weighed on the day.

While the Chinese government looked to allay fears of a wider spread, the wider spread weighed on risk appetite as the news wires reported a rise in death tolls.

On the monetary policy front, the ECB added further pressure, with ECB President Lagarde talking down the Eurozone economy.

The dovish outlook on the economy came in spite of Lagarde and the ECB having previously suggested that private sector woes had bottomed out.

On Thursday, Lagarde noted that risks to the economy remained tilted to the downside. The statement removed the hope of the Eurozone having turned a corner going into 2020.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday, with economic data limited to consumer confidence figures out of the Eurozone.

The Eurozone’s consumer confidence indicator held steady at -8.1 in January, according to prelim figures. Economists had forecast a rise to -7.8.

Disappointing consumer confidence numbers and a dovish ECB was a double whammy on the day.

Economic data from the U.S was limited to the weekly jobless claims figures that had a muted impact on the majors,

The Market Movers

For the DAX: It was yet another bearish day for the auto sector. Continental tumbled by 2.82% to lead the way, with BMW and Daimler sliding by 1.41% and 1.19% respectively. Volkswagen declined by a more modest 0.58%.

It was another mixed day for the banks, however, with Commerzbank falling by 0.92%, while Deutsche Bank rallied by 2.21% on the day.

Deutsche Lufthansa slid by 2.42%, with negative sentiment towards the coronavirus continuing to weigh.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 0.25%, with Credit Agricole and Soc Gen down by 1.11% and by 0.48% respectively.

The French auto sector also saw red. Peugeot fell by 1.57%, while Renault tumbled by 5.06%

A Citigroup downgrade to sell led to the Renault slide on the day, with analysts reporting cash depletion. Cash woes suggest a likely sale of the company’s stake in Nissan, which is considered negative.

Air France-KLM also saw a heavy loss on the day, with a 2.47% slide coming off the back of updates on the coronavirus.

On the VIX Index

The VIX saw green for a 3rd consecutive day, rising by 0.54%. Following on from a 0.47% gain on Wednesday, the VIX ended the day at 13.0.

While the S&P500 eked out a 0.11% gain on the day, concerns over the coronavirus provided support to the VIX.

The Day Ahead

It’s a particularly busy day on the Eurozone economic calendar.

Key stats include prelim January private sector PMI numbers.

Expect the numbers to have a material influence on the majors. While the hope of further monetary policy easing is positive for the majors, there is a limit and a negative outlook on the economy doesn’t help.

Positive numbers today would ease near-term concerns, though the new wires will need to be market-friendly on the coronavirus.

On the monetary policy front, ECB President Lagarde will also speak this afternoon…

From the U.S, we can expect the prelim private sector PMIs, due out later today, to also influence.

In the futures markets, at the time of writing, the DAX was up by 100.5 points, while the Dow was down by 6 points.

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