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Bob Mason

Economic Calendar:

Friday, 7th February 2020

German Industrial Production (MoM) (Dec)

German Trade Balance (Dec)

French Non-Farm Payrolls (QoQ) (Q4)


The Majors

It was a 4th consecutive day in the green for the European majors on Thursday, with the CAC40 rising by 0.88% to lead the way.

The DAX30 and EUroStoxx600 saw more modest gains of 0.72% and 0.44% respectively.

There was certainly no support from economic data from the Eurozone on the day.

While the numbers didn’t provide support, news of China announcing tariff cuts provided support on Thursday.

The tariff cuts are scheduled to take place on 14th February, with tariffs on 1,717 U.S goods due to be cut.  Next week, the cuts will range from cuts from 10% to 5%, and from 5% to 2.5%.

While China’s manufacturing sector sees output slide as a result of the spread of the coronavirus, the announcement meets part of the phase 1 agreement signed late last year.

China may well struggle, however, to meet the demand on agri purchases near-term. How Trump responds will likely be the next consideration for the majors in the days or even weeks ahead.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Thursday. Key stats included Germany factory order numbers for December.

The ECB Economic Bulletin was also in focus through the European session.

According to Destatis, factory orders slid by 2.1% in December, following a 1.3% decline in November.

  • Domestic orders increased by 1.4%, while foreign orders tumbled by 4.5%, month-on-month.
  • New orders from the euro area slumped by 13.9%, while new orders from other countries increased by 2.1%.
  • A 3.8% fall in consumer goods new orders and a 3.9% fall in the order of capital goods weighed.
  • Manufacturers of intermediate goods saw new orders increased by 1.4%.
  • Year-on-year, factory orders were down by 8.7%.

According to the ECB’s January Economic Bulletin, the ECB noted that the current monetary policy was supporting favorable financial conditions.

Other positive comments for the EUR included:

  • While the manufacturing sector remains a drag, employment growth and rising wages continued to support.
  • Risks to the Eurozone economy remained tilted to the downside, however. Geopolitical factors, rising protectionism, and vulnerabilities in emerging markets were highlighted as key risks.
  • While inflation developments remain subdued, there were also signs of a moderate increase in underlying inflation. This was in line with expectations.
  • Easier borrowing conditions for firms and households remain supportive of consumer spending and business investment. This is expected to sustain Eurozone growth and build domestic price pressure.
  • While global economic activity remains moderate, there are signs of stabilization.

The Market Movers

For the DAX: It was a mixed day for the auto sector. Daimler bucked the trend on Thursday, rising by 0.17%. BMW (-0.39%), Continental (-0.04%), and Volkswagen (-0.48%) saw red, however.

It was also a bullish day for the banks. Commerzbank rose by 3.39%, while Deutsche Bank surged by 14.33%.

The jump in Deutsche Bank came off the back of news of Capital Group taking a 3% stake.

Deutsche Lufthansa slipped by 0.17%, while Infineon Technologies consolidated Wednesday’s 9.94% bounce with a 0.14% gain.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.61%, with Credit Agricole and Soc Gen gaining 2.07% and 1.02% respectively.

It was also a bullish day for the French auto sector. Peugeot rose by 1.53, while Renault saw a rallied by 3.28%.

Air France-KLM eked out a 0.15% gain on the day.

On the VIX Index

Yet another day in the green for the equity markets led to a 4th consecutive day in the red for the VIX, which fell by 1.25% on Thursday. Following on from a 5.61% slide on Wednesday, the VIX ended the day at 15.0.

The VIX continued to come under pressure, with the market catalyst on Thursday coming from the news of China’s planned tariff cuts on 14th February.

The Day Ahead

It’s a relatively busy day on the Eurozone economic calendar. Economic data due out of the Eurozone includes December trade and industrial production figures.

Expect greater sensitivity to today’s numbers, as the latest rally runs out of steam.

Ahead of the European open, January trade data out of China will set the tone.

In the futures markets, at the time of writing, the DAX was down by 30.5 points, with the Dow down by 93 points.

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