European Equities: Service Sector PMIs and Trade in Focus

Can the markets look beyond Twitter to focus on the stats, or will trade war chatter continue to pressure the majors on the day ahead?
Bob Mason
List of stock market indices

Economic Calendar:

Monday, 5th August

  • Spanish Services PMI (Jul)
  • Italian Services PMI (Jul)
  • French Services PMI (Jul)
  • German Services PMI (Jul)
  • Eurozone Markit Composite PMI (Jul)
  • Eurozone Services PMI (Jul)

Tuesday, 6th August

  • German Factory Orders (MoM) (Jun)

Wednesday, 7th August

  • German Industrial Production (MoM) (Jun)

Thursday, 8th August

  • ECB Economic Bulletin  

Friday, 9th August

  • German Trade Balance (Jun)
  • Italian CPI (MoM) (Jul) Final

The Majors

The European majors took a tumble on Friday to end the week with heavy losses.

On the day, the CAC40 led the way down, sliding by 3.57%, with the DAX30 and EuroStoxx600 ending the day with 3.11% and 3.26% losses.

Friday’s heavy sell-off left the CAC and DAX down by 4.48% and by 4.41% for the week. The EuroStoxx600 saw a more modest 3.22% loss in the week ending 2nd August.

The losses came in response to Trump’s late Thursday tweets. The U.S President had announced the rollout of fresh tariffs on Chinese goods after the European close on Thursday.

The Stats

It was a relatively quiet day on the economic data front.

Stats included Spanish unemployment change figures and the Eurozone’s June retail sales numbers.

From Spain, unemployment fell by 4.3k, coming up short of a forecasted 21.4k decline. Unemployment had fallen by 63.8k the previous month.

The Eurozone’s retail sales figures failed to provide support early on in the session despite a 1.1% jump in sales, which came in ahead of a forecasted 0.2% rise. Sales had fallen by 0.6% in May.

According to Eurostat,

  • The volume of retail trade increased by 1.6% for automotive fuel, by 1.2% for food, drinks, and tobacco and by 1.1% for non-food products.
  • By member state, Germany recorded the largest increase in retail sales, up by 3.5%, month-on-month.
  • Portugal, Ireland and Slovenia dragged, with declines of 0.9%, 0.8%, and 0.5% respectively.
  • Year-on-year, Eurozone retail sales increased by 2.6%.
  • The volume of retail trade increased by 4.1% for non-food products in June 2019, compared with June 2018.
  • Automotive fuel sales (+1.0%) and food, drinks, and tobacco sales (+0.8%) also provided support.
  • By member state, Lithuania (+5.7%) and Malta (+5.6%) reported the largest increases in total trade volume.
  • Slovakia reported the only decrease, falling by 0.4%.

Out of the U.S

It was a busy day on the economic calendar. The stats failed to provide direction on the day, however, as risk aversion gripped the majors.

Nonfarm payrolls rose by 164k in July, which was in line with forecasts, whilst down on a 193k increase in June. Wage growth impressed, however, picking up from 3.1% to 3.2% year-on-year.

On the trade front, the U.S trade deficit failed to budge, narrowing by just $0.1bn to $55.2bn in June.

The Market Movers

From the DAX, Deutsche Bank was among just a handful of stocks to end the day the green. Leading the way on the DAX, Deutsche Bank rallied by 3.24%. Commerzbank struggled, however, with a 3.98% slide ahead of this week’s earnings release.

It was red for the rest of the pack, with Adidas leading the slide, falling by 4.03% ahead of earnings results due out on Thursday.

From the auto sector, BMW led the way down, with a 2.35% loss. Daimler (-1.2%), Volkswagen (-0.68%), and Continental (-0.38%) also saw red.

From the CAC, it was red across the board for the banking sector. Soc Gen tumbled by 4.6%, reversing most of the previous day’s 5.83% rally that came off the back of better than expected earnings. BNP Paribas and Credit Agricole also saw heavy losses, with the pair sliding by 3.96% and by 4.88% respectively.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Stats out of the Eurozone include Spanish and Italian service sector PMI numbers for July.

While finalized French and German service sector PMIs will likely have a limited impact, the Eurozone’s Composite PMI will also influence on the day.

From the U.S, the market’s preferred ISM non-manufacturing PMI will also provide direction later in the day.

Outside of the numbers, expect market sentiment towards the trade war and the global economic outlook to also influence.

At the time of writing, in the Futures market, the DAX was down by 48 points, while the Dow Mini was down by just 129 points.

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