European Equities: Service Sector PMIs Will Need to Impress…Chatter on trade dominated the news wires and the markets on Tuesday and will likely continue to do so. Expect data to influence, however.
Wednesday, 4th December 2019
- Spanish Services PMI (Nov)
- Italian Services PMI (Nov)
- French Services PMI (Nov) Final
- German Services PMI (Nov) Final
- Eurozone Markit Composite PMI (Nov) Final
- Eurozone Services PMI (Nov) Final
Thursday, 5th December 2019
- German Factory Orders (MoM) (Oct)
- Eurozone GDP (QoQ) (Q3) 3rd Estimate
- Eurozone GDP (YoY) (Q3) 3rd Estimate
- Eurozone Retail Sales (MoM) (Oct)
Friday, 5th December 2019
- German Industrial Production (MoM) (Oct)
After a particularly bearish start to the week, it was a mixed day for the majors on Tuesday, with the DAX30 rising by 0.19% to buck the trend.
The CAC40 and EuroStoxx600 joined their U.S peers in the red, with losses of 1.03% and 0.63% respectively.
With no major stats to provide direction on the day, negative sentiment towards trade weighed on risk appetite on the day.
The CAC40 came under fire off the back of U.S Administration threats of possible duties on all French exports to the U.S.
For those looking for a phase 1 trade agreement between the U.S and China, Trump also dowsed hopes of an agreement by the end of the year. On Tuesday, the U.S President stated that he may wait until after the 2020 Presidential Election.
It was a quiet day on the Eurozone economic calendar on Tuesday. Key stats were limited to Spanish unemployment figures.
While unemployment rose by 20.5k, following a 97.9k jump in the previous month, economists had forecast a 75.2k increase.
The stats were of little influence, however, as chatter on trade dominated throughout the day.
There were no material stats from the U.S to provide direction later in the day.
The Market Movers
For the DAX: It was a mixed day for the auto sector. Daimler fell by 0.92% to lead the way down, with Continental falling by 0.02%. BMW and Volkswagen managed to avoid another day in the red, however, with the pair rising by 0.08% and by 0.15% respectively.
It was a bearish day for the banks. Deutsche Bank fell by 1.28%, with Commerzbank down by 2.36%.
From the CAC, it was also a bearish day for the banks. Credit Agricole slid by 1.74% to lead the way down. BNP Paribas and Soc Gen weren’t far behind with losses of 1.69% and 1.50% respectively.
The risk aversion also weighed on the French Auto sector. Peugeot fell by 1.77%, while Renault tumbled by 2.57%.
Trump’s latest focus on French goods added pressure on Airbus and luxury brands. Airbus was the worst performer of the 40, sliding by 4.41%. Hermes and LVMH fell by 2.53% and by 1.48% respectively.
The slide in Airbus came off the back of the WTO’s findings that the EU had failed to remove all subsidies to the aircraft manufacturer. With France introducing a digital tax that is expected to impact a number of U.S tech companies, it didn’t take long for the U.S administration to take the battle to Macron…
On the VIX Index
It was another strong day for the VIX, which rose by 7.04% on Tuesday. Following an 18.15% jump on Monday, the VIX ended the day at 16.0.
The market reaction towards comments from the U.S administration on trade provided the upside on the day.
The U.S President’s plan to possibly hold off on an agreement with China until after the Presidential Election didn’t help. Trump also threatened tariffs on all French goods, while rolling out tariffs on Argentinian and Brazilian aluminum and steel imports.
The U.S majors have been in a post-Thanksgiving blues, with the S&P500 falling for a 3rd consecutive day on Tuesday.
After hitting the highest levels since mid-October, the VIX hit 18 levels for the first time since 10th October on Tuesday.
The Day Ahead
It’s a busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone included service sector PMI numbers out of Italy and Spain. Finalized PMIs are also due out of France, Germany, and the Eurozone.
Barring any deviation from prelims, we can expect the market focus to be on Italy and the Eurozone’s composite and Services PMI.
From the U.S, the market’s preferred ISM Non-Manufacturing PMI and ADP’s nonfarm employment change figures will also provide direction later in the session.
While we can expect influence from the numbers, any chatter on trade will continue to overshadow the stats on the day.
In the futures market, at the time of writing, the DAX30 was up by 54.5 points, with the Dow up by 19 points.