European Equities: Private Sector PMIs and Trade News in Focus

After a quiet week on the data front, private sector PMIs for November are in focus. Expect updates from ongoing trade talks to also influence, however.
Bob Mason
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Economic Calendar:

Friday, 22nd November 2019

  • German GDP (YoY) (Q3) 2nd Estimate
  • German GDP (QoQ) (Q3) 2nd Estimate
  • French Manufacturing PMI (Nov) Prelim
  • French Services PMI (Nov) Prelim
  • German Manufacturing PMI (Nov) Prelim
  • German Services PMI (Nov) Prelim
  • Eurozone Manufacturing PMI (Nov) Prelim
  • Eurozone Markit Composite PMI (Nov) Prelim
  • Eurozone Services PMI (Nov) Prelim

The Majors

European equities saw red for a 2nd consecutive day on Thursday, with the EuroStoxx600 falling by 0.40% to lead the way down. The DAX30 and CAC40 saw more modest losses of 0.15% and 0.26% respectively.

It could have been a lot worse on the day, with the majors finding support after opening in the deep red.

There was plenty going on, with China demanding that Trump vetoes the HK Bills, while waivers were handed out to U.S firms to allow them to supply Huawei with components.

On the trade war front, conflicting reports continued to hit the news wires. On the one hand, there were reports that a deal would not be signed this year. Later in the day, there were reports that a phase 1 agreement was in sight. Reports stated that the only holdup remained the removal of tariffs.

With the next set of tariffs due to come into effect in mid-December, expectations are that the 15th December tariffs will unlikely come into effect.

Some degree of optimism provided support to the European majors late in the day, limiting their losses.

The Stats

It was another quiet day on the Eurozone economic calendar on Thursday. Economic data was limited to the Eurozone’s prelim consumer confidence figures for November that were released late in the session.

The lack of stats in the early part of the day left the majors in the hands of geopolitics early on. In the early afternoon, the ECB monetary policy meeting minutes had a limited impact ahead of the consumer confidence figures.

There were no major surprises from the minutes to jolt the markets into action. The minutes affirmed that the ECB is now in a holding pattern as it looks to assess the effects of September’s easing.

On the economic data front, the Eurozone’s consumer confidence indicator rose from -7.6 to -7.2 in November, according to prelim figures. Economists had forecast a prelim -7.3.

From the U.S, Philly FED Manufacturing figures for November also provided support.

The Philly FED Manufacturing Index rose from 5.6 to 10.4, coming in ahead of a forecast of 7.0.

The Market Movers

For the DAX: It was a bullish day for the auto sector, as the markets responded to news that the December tariffs would likely be delayed. Daimler led the way on the DAX30, rallying by 2.27%, with BMW and Volkswagen also amongst the top 10 performers. BMW and Volkswagen rose by 0.71% and 0.57% respectively. Continental trailed the pack, however, rising by just 0.02% on the day.

It was also a positive day for the banks. Deutsche Bank gained by 1.45%, with Commerzbank up by 1.46%.

From the CAC, it was a mixed day for the banks. Soc Gen and Credit Agricole fell by 0.30% and by 0.16% respectively. BNP Paribas bucked the trend on the day, rising by 0.78%.

It was a bearish session for French Autos, however. Peugeot fell by 0.13%, with Renault down by 0.60% on the day.

On the VIX Index

The VIX returned to positive territory on Thursday, rising by 2.74%. Reversing a 0.62% fall from Wednesday, the VIX ended the day at 13.1.

A pullback in the U.S equity markets on the day led to the uptick, as sentiment towards the U.S – China trade talks continued to test risk appetite.

On the day, the VIX failed to break back through to 14 levels, however, after Wednesday’s current month high $14.2.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include prelim private sector PMI numbers out of France, Germany, and the Eurozone.

2nd estimate GDP numbers for Germany are also due out ahead of the European open.

Barring any deviation from 1st estimate figures, we would expect Germany’s manufacturing PMI and the Eurozone’s composite to have the greatest influence.

Service sector activity will need to continue to provide support, however, to ease concerns of a further slowdown in growth.

From the U.S, prelim private sector PMIs will also influence, with the Services PMI the key driver.

Outside of the numbers, expect updates from Beijing and Washington on trade to also provide direction. The news wires may well overshadow the stats on the day.

In the futures market, at the time of writing, the DAX30 was up by 4.5 points, with the Dow up by 4 points.

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