European Equities: The Majors Look Set to See Green at the OpenA better start to the day is on the cards if the futures are anything to go by. Sentiment could rapidly shift, however, should bond yields hit reverse.
Tuesday, 26th March 2019
- GfK German Consumer Climate (Apr)
- French GDP q/q (Q4)
- French GDP y/y (Q4))
Wednesday, 27th March 2019
- ECB President Draghi Speaks
Thursday, 28th March 2019
- Spanish CPI y/y (Mar) Prelim
- Spanish HICP y/y (Mar) Prelim
- German CPI m/m (Mar) Prelim
Friday, 29th March 2019
- German Retail Sales m/m (Feb)
- French Consumer Spending m/m (Feb)
- French CPI m/m (Mar) Prelim
- French HICP m/m (Mar) Prelim
- Spanish GDP q/q (Q4)
- German Unemployment Change (Mar)
- German Unemployment Rate (Mar)
- Italian CPI m/m (Mar) Prelim
It was another day in the red for the European majors on Monday. Leading the way down on the day was the EuroStoxx600, which fell by 0.45%.
For once, the DAX managed to avoid the heaviest of losses, ending the day down 0.15%, while the CAC40 fell by 0.18%.
On the economic data front, improved business sentiment figures out of Germany provided some much-needed support. The headline IFO Business Climate Index had fallen for 6-consecutive months before a pickup in March.
It wasn’t all positive, however, with the manufacturing sector seeing the business climate weaken again. The expectations component actually fell to its lowest level since Nov-12.
Outside of the data, however, concerns over a possible U.S recession and uncertainty over Brexit ahead of the original 29th March departure date weighed.
Having seen how the Asian majors had performed ahead of the European open, investors managed to get through the day relatively unscathed, however.
Government bond yields steadied through the 2nd half of the day to limit the downside.
While the Dow managed to close out the day in positive territory, the 3-month to 10-year U.S Treasury yield curve remained inverted by the end of the day.
Market panic over an inversion had kicked in on Friday and, while the inversion has had a tendency to deliver a recession, it’s not assured.
The FED will do its utmost to shore up growth and avoid a recession and that can only be a good thing for the European majors.
A negative, however, would be a stronger EUR. But, with the European economy having seen a marked slowdown, there’s unlikely to be any meaningful policy convergence near-term to give the EUR any material upside against the Greenback.
The Day Ahead
Economic data scheduled for release out of the Eurozone is on the lighter side once more.
Key stats are limited to consumer confidence figures out of Germany and finalized 4th quarter GDP numbers out of France.
Barring any material deviation from prelims, the focus will be on consumer sentiment, though how much impact positive numbers would have on the European major bourses remains to be seen.
Focus through the day will likely be on the direction of government bond yields. Any slide in U.S Treasury 10-year yields and expect a marked deterioration in sentiment.
Outside the stats, Brexit chatter and any commentary from the Oval Office ahead of U.S – China trade talks later this week could also be a factor.
At the time of writing, the DAX30 and CAC40 futures were in the green, tracking the U.S futures into positive territory. The Asian majors were on the bounce earlier on in the day, with the exception of the Chinese majors.
Investors will be looking for some positive economic data to shore up risk appetite through to the close.