European Equities: Trade Data, Stimulus and UK Politics in Focus

The Majors

It was a third day in the green for the majors on Friday, as the majors found further support from an easing in geopolitical risk and expectations of monetary policy easing.

On the geopolitical front, renewed hope of a resolution to the U.S – China trade war and the UK Parliament’s blocking of a no-deal Brexit also provided support.

Leading the way on Friday was the DAX30, which gained 0.54% to close out the week up by 2.11%. The CAC40 and EuroStoxx600 rose by 0.19% and 0.32% respectively. In spite of the CAC’s modest gains on the day, the index led the way for the week, rising by 2.2%, with the EuroStoxx600 up by 2.02%.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Friday. July industrial production figures, out of Germany were in focus in the early part of the day.

According to Destatis,

• Industrial production fell by 0.6%, month-on-month, in July, following a 1.1% fall in June.
• Production excluding energy and construction was down by 0.8%.
• Within the industry, the production of intermediate goods fell by 0.7%, with production of capital goods falling by 1.2%.
• Bucking the trend, the production of consumer goods increased by 0.6%.
• Year-on-year, production fell by 4.2% in July, following a 4.7% fall in June.

From the U.S, it was a mixed bag on the day. While the unemployment rate held steady and wage growth continued to rise at 3.2%, nonfarm payrolls disappointed.

A 130k in nonfarm payrolls continued to support the market expectation of a FED rate cut next week, in spite of mixed chatter from the FED.

Late in the day, FED Chair Powell talked of the FED’s commitment to supporting the U.S economy. Powell’s comments continue to support a priced-in rate cut despite the FED Chair holding back from affirming an actual cut.

The Market Movers

From the DAX, the positive news on trade talks continued to support ThyssenKrupp, which rallied 3.88% off the back of a 6.36% gain on Thursday.

Bank stocks held onto Thursday’s gains, with Deutsche Bank and Commerzbank rising by 0.03% and 0.49% respectively.

For the auto sector, it was a mixed end to the week. Continental bucked the trend on the day, rising by 0.45%. It was red for the rest. Daimler fell by 0.57%, with BMW and Volkswagen declining by 0.61% and 0.74% respectively.

From the CAC, it was a mixed day for the banks. Credit Agricole led the way, rising by 0.42%. BNP Paribas and Soc Gen fell by 0.02% and 0.10% respectively. It was also a mixed day for the auto sector, Renault slipped by 0.43%, while Peugeot rose by 2.98%.

On the VIX Index

The VIX Index saw red for a 4^th consecutive day on Friday, falling by 7.98% to end the week down 21.05% at 15.0.

Another day of disappointing economic data failed to rile the markets, with geopolitical risk and expectation of a FED rate cut placating the markets.

The Day Ahead

It’s a relatively quiet start to the week on the Eurozone economic calendar. July trade data is due out of Germany in the early part of the day. Disappointing trade figures from elsewhere suggests a further narrowing in the trade deficit.

While we can expect the trade data to have some influence, chatter from the UK Parliament and any further comments from Beijing and Washington need monitoring.

There are no material stats due out of the U.S later in the day to provide direction.

From the weekend, trade data out of China failed to impress. In US Dollar terms, the trade surplus narrowed from $44.58bn to $34.84bn, with exports falling by 1%. An announcement last week of further stimulus from the PBoC muted the impact of the numbers, however.

In the futures markets, at the time of writing, the DAX was up by 36.5 points, with the Dow Mini was up by 52 points.