European Equities: Private Sector PMIs and FED Chair Powell Testimony in Focus

The Majors

It was a bearish session for the European majors on Tuesday, with Monday’s modest gains reversed with interest.

The EuroStoxx600 and CAC40 fell by 0.92% and by 0.81% respectively, with the DAX30 ending the day down by 1.18%.

Better than expected economic data from China failed to provide the majors with support. A marked pickup in inflationary pressure across the Eurozone overshadowed the better-than-expected numbers.

In November, the NBS Manufacturing PMI rose from 49.2 to 50.1, while the Non-Manufacturing PMI slipped from 52.4 to 52.3.

Key to the sell-off on Tuesday were comments from Moderna CEO Stephane Bancel and FED Chair Powell’s testimony.

Moderna’s CEO stated, early in the day, on the likely reduced efficacy of vaccines against the omicron strain.

Late in the session, FED Chair Powell added to the market angst. Powell talked of a possible speedier tightening of monetary policy in relation to the bond buying program.

The Stats

It was another busy economic calendar this morning. Member state and Eurozone inflation figures were in focus along with French consumer spending and German unemployment. 3^rd quarter GDP numbers from France also garnered interest.

French Economy

In the 3^rd quarter, the French economy expanded by 3% in the 3^rd quarter, which was in line with prelim figures. In the 2^nd quarter, the economy had expanded by 1.3%.

Consumer prices were on the rise once more, according to prelim figures. In November, France’s annual rate of inflation picked up from 2.6% to 2.8%. Month-on-month, consumer prices rose by 0.4% off the back of a 0.4% increase in October.

According to Insee.fr,

• Energy prices were up 21.6% year-on-year, driving inflation further northwards.
• There was also an increase in prices for food (+0.4%).
• Prices for manufactured products increased by 0.8% and for services by 1.9%.

While inflationary pressures continued to build, consumer spending was in the decline. In October, consumer spending decreased by 0.4%, reversing a 0.2% rise from September.

German Economy

In November, Germany’s unemployment rate fell from 5.4% to 5.3%, supported by a 34k decline in unemployment. In October, there had been a 39k fall in the number of unemployed.

Eurozone Inflation

For the Eurozone, the annual rate of inflation picked up from 4.1% to 4.9% according to prelim figures for November. Month-on-month, consumer prices rose by 0.7% after having increased by 0.7% in October.

According to Eurostat,

• Energy is expected to have the highest annual rate in November (27.4% compared with 23.7% in October).
• Services is expected to have an annual rate of 2.7%, up from 2.1% from October.
• Non-energy industrial goods saw a pickup from 2.0% to 2.4% with food, alcohol, & tobacco up from 1.9% to 2.2%.

From the U.S

Consumer confidence was in focus ahead of FED Chair Powell testimony.

In November, the CB Consumer Confidence Index fell from a downwardly revised 111.6 to 109.5. Economists had forecast a decline to 111.0.

On the monetary policy front, FED Chair Powell talked of a likely discussion in the next FOMC meeting vis-à-vis speeding up the planned tapering of bond purchases. Such an outcome would bring forward a shift in policy on interest rates.

The FED Chair also acknowledged that the pickup in inflation could no longer be described as transitory.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Tuesday. BMW and Volkswagen fell by 0.67% and by 1.60% respectively. Continental rallied by 2.06% however, with Daimler ending the day up by 0.42%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.14%, while Commerzbank ended the day flat.

From the CAC, it was a mixed day for the banks. Soc Gen rose by 0.22%, while Credit Agricole and BNP Paribas both saw losses of 0.54% respectively.

The French auto sector had a bearish session. Stellantis NV slid by 3.64%, with Renault ending the day down by 2.35%.

Air France-KLM and Airbus SE fell by 2.88% and by 0.97% respectively.

On the VIX Index

It was back into the green for the  VIX on Tuesday, as the U.S equity markets hit reverse once more.

Partially reversing a 19.78% slide from Monday, the VIX rose by 18.42% to end the day at 27.19.

The NASDAQ fell by 1.55%, with the Dow and the S&P500 seeing losses of 1.86% and 1.90% respectively.