European Equities: Progress on Trade Talks Ease Market Jitters Early on

The Majors

It was a mixed day for the European majors on Wednesday. The EuroStoxx600 eked out a mere 0.02% gain, while the CAC slipped by 0.12%. Wedged between the pair was the DAX, which ended the day flat.

A relatively choppy day saw the trio slide into the red through the early part of the day before finding support.

While there were no material stats released out of the Eurozone to provide direction, ECB Draghi provided his latest views on the economy and monetary policy.

A relatively dovish delivery contributed to the shift in risk sentiment through the day, which led to the early pullback in the majors.

Recovering through the middle of the day, a move into positive territory was short-lived as economic growth concerns returned. Government bond yields hit reverse, with the U.S 3-month/10-year yield curve inverting once more.

Out of the U.S, a narrowing in the trade deficit did little to support riskier assets. A particularly dovish RBNZ in the early part of the day and Draghi’s comments were a reminder of what lies ahead.

Throw in Brexit and the lack of progress in parliament on formulating a plan and British demand for European goods would also be a concern.

The Day Ahead

Economic data scheduled for release out of the Eurozone includes prelim inflation figures out of Germany and Spain and Eurozone business confidence figures.

Barring an unlikely material pickup in the annual rate of inflation, business confidence figures will be the key driver for the majors.

Forecasts are for business confidence to soften in March, which would be considered a negative for the EUR and the majors.

Out of the Eurozone, there could be another slide in U.S Treasury and European government bond yields. 2^nd estimate GDP numbers out of the U.S are expected to be revised downwards falling a marked downward revision to December retail sales figures. Anything worse than forecasted and expect market conditions to deteriorate further.

Outside of the data, U.S – China trade talks resumed this morning and could offset some of the negativity should progress be made.

At the time of writing, the DAX30 and CAC40 futures were in the red, tracking the U.S futures into negative territory. The futures have recovered from heavier losses, however. Positive updates from trade talks could continue to support a futures rebound.