European Equities: The Futures are Pointing to another Day in the Red

The Majors

The bullish start to the quarter came to an end on Monday. The DAX failed to make it 8 in a row. A 0.39% fall led the European majors into the red at the start of the week.

More modest losses were seen in the EuroStoxx600 and CAC40, with the pair falling by just 0.19% and by 0.08% respectively.

The losses on the day came in spite of a rise in auto sector stocks. Volkswagen and Daimler were amongst the leading stocks, rising by 2.09% and by 1.14% respectively. Responses by the respective car manufacturers intimated no wrongdoing. A recovery may be short-lived, however, with the auto sector in Trump’s line of sight.

While the auto sector found support, it was doom and gloom for Commerzbank, which slumped by 2.4% on the day. Increased chatter on merger talks with Deutsche Bank weighed, with Deutsche Bank ending the day with a 1.91% loss.

BNP Paribas and Unicredit S.p.A also saw red on the day. JPMorgan Chase and Wells Fargo are due to release quarterly earnings on Friday. Weak numbers could well set the broader market into a tailspin.

Support from progress on the U.S – China trade talks was beginning to wane at the end of last week. With earnings season kicking off, some profit taking was to be expected ahead of tomorrow’s ECB press conference.

The Stats,

Economic data out of the Eurozone on Monday was limited to Germany’s trade data for February. According to figures released by DeStatis, the trade surplus widened from €18.6bn to €18.8bn. Forecasts were for the surplus to narrow to €18.0bn.

While the widening would tend to be positive for the DAX, the devil was in the details. Exports fell by 1.3% month-on-month, while imports fell by 1.6%. The larger fall in imports led to the widening rather than a pickup in exports.

The disappointing export numbers were aligned with recent manufacturing PMI and factory order numbers out of Germany, all of which reflected weaker overseas demand.

The Day Ahead

It’s a quiet day ahead on the economic calendar. A lack of material stats through the day will increase the influence of retail sales figures out of Italy in the early afternoon.

With stats out of the U.S limited to job opening figures, Brexit and any chatter on the U.S – China trade talks will be the key driver. Throw in some apprehension going into the earnings season and we could see another pullback in the day ahead, however.

Brexit could come to the rescue should there be an agreement to extend through to June, but with the EUR also on a tear at the start of the week, there’s plenty of pressure on European multinationals.

A stronger EUR and weak foreign demand is not the greatest combination to fuel appetite for European stocks.

At the time of writing, the futures pointed to a 22.5 point fall in the DAX and a 4.5 point rise for the CAC40 at the open.