European Equities: The U.S Presidential Election to Drive the Majors

October’s manufacturing sector PMIs were in focus, with the sector reporting a broad-based pickup in output at the start of the quarter.

Following better than expected 3^rd quarter GDP numbers last week, the stats offset negative sentiment towards the 2^nd wave of the COVID-19 pandemic.

The better than expected stats also eased tensions ahead of the U.S Presidential Election. With Joe Biden ahead in the polls, hopes are for a Biden victory, an outcome that is favored by the European markets. Trump has continued to target the EU on trade and this would likely continue in the event of a 2^nd term…

The Stats

It was a busy day on the Eurozone economic calendar.

Key stats included October manufacturing PMIs for Italy and Spain. Finalized PMIs for France, Germany, and the Eurozone were also in focus.

The PMIs

In October, Spain’s Manufacturing PMI rose from 50.8 to a 3-month high of 52.5. Economists had forecast a rise to 51.0.

Italy’s Manufacturing PMI rose from 53.2 to a 31-month high 53.8, which came in ahead of a forecasted 53.5.

The finalized French PMI came in at a 3-month high of 51.3, which was up from a prelim 51.0 and September 51.2.

Germany’s PMI came in at a 31-month high of 58.2. This was up from a prelim 58.0. In September, the PMI had stood at 56.4.

For the Eurozone, the October PMI came in at 54.8. This was up from a prelim 54.4 and up from September’s 53.7.

According to the Eurozone’s October Markit Survey,

• October’s PMI was the highest in 27-months, with the sector seeing continued expansion since July.
• Growth was seen across all three market groups. Investment goods recorded the fastest expansion, with growth at its highest level for over 2-years.
• While intermediate goods saw a solid gain, growth weakened to a marginal pace amongst consumer goods producers.
• New orders increased at the sharpest pace since the beginning of 2018. The demand came from both domestic and external clients.
• New export business rose at the fastest pace since February 2018.
• The jump in new business led to a 3^rd successive monthly increase in work outstanding. The rate of increase was also the fastest since February 2018.
• Employment levels continued to decline, however, with the current period of contraction extending for a year-and-a-half.
• Manufacturing firms had a positive outlook for a 5^th consecutive month. Italian and German firms were the most optimistic about output over the coming 12-months.

By country, Germany stood at the top of the table, while Greece propped up the bottom, with a 3-month low PMI of 48.7.

From the U.S

It was also a busier day on the economic calendar. Key stats included the market’s preferred ISM Manufacturing PMI and finalized Markit survey PMI figures for October.

The ISM Manufacturing PMI jumped from 55.4 to 59.3 in October, coming in well ahead of a forecasted 55.8. A strong pickup in new orders, a return to hiring across the sector, and a fall in inventories were all positive.

In October, the Markit Manufacturing PMI came in at 53.4, which was up from a prelim 53.3 and September 53.2.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. Daimler led the way, rallying by 2.48%, with BMW and Volkswagen rising by 1.43% and by 1.26% respectively. Continental saw a more modest 0.15% gain on the day.

It was a particularly bullish day for the banks. Deutsche Bank rallied by 3.47%, with Commerzbank gaining 4.45%

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rallied by 4.25% and by 4.16% respectively. Credit Agricole saw a more modest 2.95% gain.

It was a relatively bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 2.56% and 1.18% respectively.

Air France-KLM jumped by 4.98% following on from a 1.01% gain on Friday, while Airbus SE eked out a 0.8% gain.

On the VIX Index

It was back into the red for the VIX on Monday. Reversing a 1.14% gain from Friday, the VIX fell by 2.34% to end the day at 37.13.

On Monday, the Dow and S&P500 saw gains of 1.6% and by 1.23% respectively. The NASDAQ rose by a more modest 0.42%, with upbeat economic data providing support ahead of the Presidential Election.

The Day Ahead

It’s a day ahead on the Eurozone economic calendar. There are no material stats from the Eurozone to provide the majors with direction.

The lack of stats will leave the European majors in the hands of the U.S Presidential Election through the day.

From the U.S, September factory orders will likely have a muted impact, with the Election results key on the day.

Postal votes are expected to lengthen the vote count process, which could extend for a few weeks. Coupled with the threat of Trump contesting the outcome, this could be a testy time for the markets. Alongside the Presidential Election results, the senate race will also be key.

The Futures

In the futures markets, at the time of writing, the Dow was up by 69 points.

For a look at all of today’s economic events, check out our economic calendar.