European Equities: Private Sector PMIs and Geopolitics in FocusIt’s a busy day ahead on the economic calendar. PMI numbers will influence as the markets also monitor progress on Brexit…
Thursday, 1st October
Spanish Manufacturing PMI (Sep)
Italian Manufacturing PMI (Sep)
French Manufacturing PMI (Sep) Final
German Manufacturing PMI (Sep) Final
Eurozone Manufacturing PMI (Sep) Final
Eurozone Unemployment Rate (Aug)
EU Leaders Summit
Friday, 2nd October
Eurozone Core CPI (YoY) September Prelim
Eurozone CPI (YoY) September Prelim
Eurozone CPI (MoM) September Prelim
It was a relatively bearish day for the European majors on Wednesday. The CAC40 and DAX30 fell by 0.59% and by 0.51% respectively, with the EuroStoxx600 ending the day down by 0.11%.
Market reaction to the 1st of the U.S Presidential Election live debates weighed on market risk appetite on the day.
The futures had been in the green ahead of the debate that kicked off in the early hours, European time. For the markets, a Trump victory is the favored outcome. While spending would be drastically cut, there would not be the tax hikes as promised by the Democrats. A lack of a clear winner from the debate and Biden’s lead in the polls was ultimately enough to leave the majors in the red.
Economic data were skewed to the positive on the day, supporting a brief bounce back into the green before a late reversal.
It was a particularly busy end to the month on the Eurozone economic calendar.
Through the early part of the day, key stats included French and German retail sales figures for August and French inflation numbers.
Later in the session, German unemployment and prelim September inflation figures for Italy were in focus.
In Germany, retail sales rose by 3.1%, reversing a 0.20% decline from July. Economists had forecast a 0.4% rise.
From France, spending increased by 2.3%, reversing a 0.9% decline in July. Economists had forecast a 0.1% fall.
While the figures were positive, the pickup in new COVID-19 cases in September is expected to impact spending at the end of the quarter, however.
German Labor market conditions improved in September, with the unemployment rate falling from 6.4% to 6.3%. Economists had forecast for the unemployment rate to hold steady at 6.4%.
Unemployment fell by 8K, following a 9k decline in August, which was in line with forecasts.
French and Italian inflation figures had a muted impact on the majors in spite of a pickup in deflationary pressures.
In France, consumer prices fell by 0.5% in September, according to prelim figures, following a 0.1% decline in August. The harmonized consumer price index fell by 0.6%, following a 0.1% slip in August.
From Italy, inflation figures were no better, with consumer prices falling by 0.6%. In August, consumer prices had risen by 0.3%.
The figures reaffirmed recent concern over a pickup in deflationary pressures and coincided with talk of a possible adjustment to the ECB’s policy objectives. ECB President Lagarde talked of the need to adjust the ECB’s objective on price stability.
From the U.S
It was a relatively busy day on the economic calendar. Key stats included finalized 2nd quarter GDP, Chicago PMI, and ADP nonfarm employment change figures.
According to finalized figures, the U.S economy contracted by 31.4% in the 2nd quarter. This was revised up from a prelim 31.7% contraction and forecasts.
Looking at the ADP numbers, non-farm employment increased by 749k, following a 481k rise in August. Economists had forecast a 650k increase.
Of less influence on the day was Chicago’s PMI for September, which jumped from 51.2 to 62.4.
In the early part of the day, the 1st U.S presidential debate garnered plenty of attention. The negative sentiment towards the debate also overshadowed upbeat economic data from China. Private sector activity in China continued to reflect a solid economic recovery from the COVID-19 lockdown early in the year.
The Market Movers
For the DAX: It was another mixed day for the auto sector on Wednesday. Continental slipped by 0.15% to buck the trend on the day. BMW and Volkswagen saw modest gains of 0.19% and 0.17% respectively, while Daimler rallied by 1.03%.
It was a bullish day for the bank. Deutsche Bank and Commerzbank rose by 1.49% and by 2.09% respectively.
From the CAC, it was also a mixed day for the banking sector. Credit Agricole and Soc Gen rose by 0.95% and by 2.63% respectively, while BNP Paribas slipped by 0.06%.
It was a mixed day for the French auto sector. Peugeot rose by 1.01%, while Renault ended the day with a 0.20% loss.
Air France-KLM rose by 2.28%, while Airbus SE fell by 0.83%.
On the VIX Index
The VIX saw green for a 2nd consecutive day on Wednesday, with the upside coming in spite of the gains across the U.S majors.
Following on from a 0.31% rise on Tuesday, the VIX gained 0.38% on Wednesday to end the day at 26.37.
The U.S majors managed to brush off the negative sentiment towards the U.S presidential debate. Hopes of a COVID-19 relief package delivered support for the majors on the day. Upbeat economic data also contributed, as nonfarm payroll and manufacturing data from Chicago impressed.
The Dow and S&P500 rose by 1.20% and by 0.83% respectively, with the NASDAQ ending the day up by 0.74%.
The Day Ahead
It’s another busy day ahead on the Eurozone economic calendar.
On the economic data front, manufacturing PMIs from Italy and Spain will provide direction going into the European open.
Finalized manufacturing PMIs for France, Germany, and the Eurozone will also be in focus later this morning.
Barring any revisions to prelim numbers, however, expect Italy and the Eurozone’s PMI to have the greatest influence.
Eurozone unemployment figures due out later in the day should have a muted impact on the majors…
From the U.S, key stats include inflation, personal spending, weekly jobless claims, and the market’s preferred ISM manufacturing PMI.
Expect the ISM manufacturing PMI and the weekly jobless claims to have the greatest impact later in the day.
On the geopolitical risk front, U.S politics and Brexit will also be key drivers on the day.
In the futures markets, at the time of writing, the Dow was up by 21 points.
For a look at all of today’s economic events, check out our economic calendar.