European Equities: The Trade Obsession Will Sideline the Stats

It could be another day in the red for the majors as sentiment towards trade turns sour. Any positive data will be overshadowed by any trade talk…
Bob Mason
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Economic Calendar:

Tuesday, 10th December 2019

  • French Non-Farm Payrolls (QoQ) (Q3)
  • German ZEW Current Conditions (Dec)
  • German ZEW Economic Sentiment (Dec)
  • Eurozone ZEW Economic Sentiment (Dec)

Thursday, 12th December 2019

  • German CPI (MoM) (Nov) Final
  • French CPI (MoM) (Nov) Final
  • French HICP (MoM) (Nov) Final
  • Eurozone Industrial Production (MoM) (Oct)
  • ECB Deposit Facility Rate (Dec) / ECB Interest Rate Decision (Dec)
  • ECB Press Conference

Friday, 13th December 2019

  • Spanish CPI (YoY) (Nov) Final
  • Spanish HICP (YoY) (Nov) Final

The Majors

It was a bearish start to the week for the European majors, with the CAC40 falling by 0.59% to lead the way down.

The DAX30 and EuroStoxx600 weren’t far behind, with losses of 0.46% and 0.24% respectively.

Economic data from the weekend weighed on the futures markets from the get-go on Monday, as trade data out of China disappointed.

If the trade data and failure to deliver a phase 1 agreement is anything to go by, more economic doom and gloom could be on the horizon. Year-on-year, China exports fell for a 4th consecutive month in November. That made it 7 monthly declines out of 11 for the current year…

On the geopolitical front, a lack of progress towards a phase 1 agreement also pressured the majors at the start of the week.

Talk from U.S administration, late last week, of 15th December tariffs to go ahead as scheduled was the negative, particularly with China demanding a rollback on existing tariffs.

With the UK General Election now just days away, there’s plenty for the markets to consider in the coming days.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Key stats were limited German trade data for October that delivered some much needed positive news.

According to Destatis, the trade surplus widened from €19.2bn to €20.6n in October. Economists had forecast a surplus of €19.0bn.

  • Germany exported goods to the value of €119.5bn, an increase of 1.9% year-on-year.
    • Exports to EU member states increased by just 0.1% to €70.0bn.
    • Goods to the value of €43.8bn (-0.9%) were exported to the Euro area.
    • Exports of goods to countries outside the EU totaled €49.5bn, a 4.6% rise year-on-year.
  • Imports decreased by 0.6% to €98.0bn
    • Imports from EU member states fell by 0.2% to €55.2bn.
    • The value of goods imported from the Euro area stood at €35.5bn, up by 0.1% year-on-year.
    • Imports from countries outside of the EU totaled €42.8bn, down by 1.0%.

From the U.S,

There were no material stats to provide direction late in the session.

The Market Movers

For the DAX: It was a bearish day for the auto sector, with negative sentiment towards trade overshadowing positive trade figures. Continental and Daimler led the way down, with losses of 1.19% and 1.00% respectively. BMW and Volkswagen weren’t far behind, with declines of 0.95% and 0.37% respectively on the day.

By contrast, it was a positive day for the banks, with Deutsche Bank and Commerzbank rising by 0.35% and by 0.13% respectively.

From the CAC, it was a mixed day for the banks. Credit Agricole bucked the trend with a 0.28% gain on the day. BNP Paribas and Soc Gen fell by 0.33% and by 0.09% respectively.

In spite of the negative sentiment towards trade, Renault avoided red on the day, rising by 0.11%. Peugeot tracked its peers from Germany, however, sliding by 1.86%.

On the VIX Index

A run of 3 consecutive days in the red came to an abrupt end on Monday, with the VIX jumping by 16.5% on the day.

Reversing a 6.2% slide from Friday, with interest, the VIX closed out the day at 15.9.

The trade sentiment pendulum swung back in favor of the bears on Monday, as economic data from China and a lack of progress towards a phase 1 agreement weighed on the U.S markets.

With the 15th December deadline rapidly approaching and the UK General Election on Thursday also there, it’s unlikely to be smooth sailing… At a minimum, the U.S administration would need to delay the rollout of tariffs that are due to kick in on Sunday…

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include 3rd quarter nonfarm payrolls out of France and business sentiment figures for Germany and the Eurozone.

Barring particularly dire numbers from France, the market focus will be on the sentiment numbers due out later this morning. Forecasts are DAX negative.

From the U.S, 3rd quarter nonfarm productivity and unit labor cost figures are unlikely to influence, leaving geopolitics in focus late on.

On the geopolitical front, the 15th December tariff deadline is approaching and there’s still no phase 1 agreement. From the UK, some uncertainty going into Thursday’s General Election will also be a test for the majors.

Expect chatter on trade to be the main area of focus, with any updates likely to overshadow the numbers.

In the futures market, at the time of writing, the DAX30 was down by 19 points, while the Dow was up by 8 points.

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