European Equities: Private Sector PMIs and Geopolitics in Focus

Uncertainty over the trade weighed on the majors in the early part of the day. Private sector PMIs and geopolitics will be the key drivers today.
Bob Mason
Global financial markets

Economic Calendar:

Monday, 23rd September

  • French Manufacturing PMI (Sep) Prelim
  • French Services PMI (Sep) Prelim
  • German Manufacturing PMI (Sep) Prelim
  • German Services PMI (Sep) Prelim
  • Eurozone Manufacturing PMI (Sep) Prelim
  • Eurozone Markit Composite PMI (Sep) Prelim
  • Eurozone Services PMI (Sep) Prelim

Tuesday, 24th September

  • German Ifo Business Climate Index (Sep)

Thursday, 26th September

  • GfK German Consumer Climate (Oct)
  • ECB Economic Bulletin

Friday, 27th September

  • French Consumer Spending (MoM) (Aug)

The Majors

It was a positive end to the week for the European majors. The CAC40 and EuroStoxx600 led the way, with gains of 0.56% and 0.29% respectively., while the DAX30 rose by just 0.08%.

A modest gain on Friday left the DAX30 flat for the week, while the CAC40 and EuroStoxx600 rose by 0.62% and by 0.30% respectively.

With the majors heading into the last week of the quarter, it’s been a bullish month of September. The DAX30 leads the way, up by 4.43%, with the CAC40 and EuroStoxx600 not far behind with gains of 3.84% and 3.55% respectively.

Monetary policy support and easing geopolitical risk provided the upside, which comes in spite of some disappointing economic data in recent months. Expectations are that monetary policy support would avert an economic meltdown.

On Friday, the European majors managed to avoid a sell-off, with news of China canceling U.S farm visits coming after the European close.

Through the early part of the day on Friday, the PBoC failed to fuel a rally. While cutting the Loan Prime Rate from 4.25% to 4.20%, it was less than an expected cut to 4.15%.

The Stats

It was a quiet day on the Eurozone economic calendar on Friday. Economic data was limited to August wholesale inflation figures out of Germany and Eurozone consumer confidence numbers.

From Germany, the Producer Price Index fell by 0.5% in August, reversing a 0.1% rise in July. Economists had forecast for a 0.2% fall.

From the Eurozone, consumer confidence saw a slight improvement, with the prelim consumer confidence index rising by -7.1 to -6.5%. Economists had forecast a rise to -7.0.

According to the EU Commission Survey,

  • The DG ECFIN flash estimate of the consumer confidence indicate continued to hold well above the long-run average of -10.7.

There were no material stats out of the U.S to influence the European majors on the day.

The Market Movers

From the DAX, it was another mixed day for the auto sector on Friday. Volkswagen and BMW made gains of 0.53% and 0.36% respectively. Continental led the way down, with a 2.9% slide, while Daimler slipped by just 0.07%.

It was also a mixed day for the banks. Deutsche Bank fell by 0.86%, while Commerzbank gained 0.40%.

From the CAC, it was a solid day for the banks. BNP Paribas led the way, rallying by 1.22%. Credit Agricole and Soc Gen rose by 0.27% and 0.87% respectively. The auto sector also closed out the day in the green. Renault rose by 0.57%, whilst Peugeot gained just 0.04%.

On the VIX Index

The VIX Index saw green for just the 3rd day in 14 on Friday, rising by 8.51% to end the day at 15.3.

Support kicked in late in the day, with the markets reacting to the news of Chinese officials canceling a visit to U.S farms. Trump had spoken on Friday of being in no hurry to end the trade war ahead of next year’s election.

The news led to a pullback in the U.S majors, supporting the uptick in the VIX.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. September prelim private sector PMIs are due out of France, Germany, and the Eurozone.

While Germany’s manufacturing sector PMI will continue to have the greatest impact, we can expect the Eurozone’s service and composite PMIs to also influence.

There are no material stats due out of the U.S to provide direction late in the European session.

Outside of the numbers, geopolitical risk will continue to be a driving force. While Brexit will certainly influence, any further chatter from Beijing and Washington on trade will likely be the key driver.

Trump’s comments from Friday suggest that the extended trade war could go on for another year, which weighed on risk appetite in the early hours.

In the futures markets, at the time of writing, the DAX was down by 26.5 points, while the Dow Mini was up by 108 points.

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