European Equities: Service Sector PMIs in Focus

Following Tuesday’s rally, it could be back to reality for the majors. Service sector PMI numbers will influence later today…
Bob Mason
Businessman touching stock market graph on a virtual screen display.

Economic Calendar:

Wednesday, 5th February 2020

Spanish Services PMI (Jan)

Italian Services PMI (Jan)

French Services PMI (Jan) Final

German Services PMI (Jan) Final

Eurozone Markit Composite PMI (Jan) Final

Eurozone Services PMI (Jan) Final

Eurozone Retail Sales (MoM) (Dec)

Thursday, 6th February 2020

German Factory Orders (MoM) (Dec)

ECB Economic Bulletin

EU Economic Forecasts

Friday, 7th February 2020

German Industrial Production (MoM) (Dec)

German Trade Balance (Dec)

French Non-Farm Payrolls (QoQ) (Q4)

The Majors

It was a particularly bullish day on Tuesday, with the DAX30 rallying by 1.81% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 1.76% and 1.64% respectively.

For the majors, support from the PBoC drove demand for riskier assets on the day. The central bank support allowed the markets to brush aside concerns over the effects of the coronavirus on the global economy.

In the early part of the day, the Asian markets set the tone, with the CSI300 rallying by 2.64%.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Tuesday. Key stats included unemployment figures out of Spain and inflation numbers out of Italy.

The stats had a muted impact on the majors, in spite of a pick in inflation in Italy and a jump in unemployment in Spain.

Later in the day, factor orders from the U.S provided support, with orders jumping by 1.8% in December, reversing a 1.2% fall from November.

The Market Movers

For the DAX: It was a bullish day for the auto sector. Volkswagen led the way rallying by 3.11%, with BMW and Daimler rising by 1.35% and by 1.67% respectively. Continental saw a more modest 0.57% gain.

It was also a bullish day for the banks. Commerzbank rallied by 3.77%, with Deutsche Bank ending the day up by 0.44%.

Deutsche Lufthansa also found support, surging by 3.68%. Elsewhere, Infineon Technologies and Wirecard also bounced back, rallying by 3.82% and 4.51% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.97%, with Credit Agricole and Soc Gen up by 1.82% and 1.20% respectively.

It was a mixed day for the French auto sector, however. Peugeot rose by 1.59, while Renault fell by 0.13%

Air France-KLM rallied by 3.70%.

On the VIX Index

The equity market rally led to a 2nd consecutive day in the red for the VIX, which fell by 10.68%. Following on from a 4.62% decline on Monday, the VIX ended the day at 16.1.

PBoC support earlier in the day drove demand for riskier assets as the Chinese government looked to offset the effects of the coronavirus.

On the day, the S&P500 rallied by 1.50%, with the NASDAQ hitting a fresh record high.

The Day Ahead

It’s a busy day on the Eurozone economic calendar. Service sector PMI figures are due out of Spain and Italy. Finalized PMI numbers are also due out of France, Germany and the Eurozone, along with Eurozone retail sales figures.

Barring revisions to figures out of France and Germany, the Eurozone composite will likely have the greatest impact on the day. Retail sales aren’t expected to impress following the numbers out of Germany and France last week.

Later in the day, the ISM non-manufacturing PMI  out of the U.S will also provide direction. Forecasts are for a pickup in service sector activity.

In the futures markets, at the time of writing, the DAX was down by 22 points, with the Dow down by 51 points.

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