European Equities: Trade Optimism and Weak Stats to Battle It Out

The Majors

It was a bullish end to the week for the European majors, with the EuroStoxx600 rising by 0.92% to lead the way on Friday. The CAC40 and DAX30 weren’t far behind, with gains of 0.82% and 0.81% respectively.

Support for the majors continued to come from upbeat sentiment towards the U.S and China’s phase 1 trade agreement. At the end of the week, the U.S administration announced that both sides will sign the agreement in early January.

Jitters over the possibility of a hard Brexit eased late in the week, with a trade war cease-fire of far greater significance for the global financial markets.

The Eurozone has more to lose should Britain leave without an agreement and trade terms default to those of the WTO. The immediate focus must be on the U.S and China, however, when considering that Britain has a full-year to go before such an outcome can become a reality…

The Stats

It was a busy day on the Eurozone economic calendar on Friday. Key stats included consumer spending figures out of France and German and Eurozone consumer confidence figures.

There was nothing from the numbers to support the upswing on the day, however.

From France, consumer spending rose by just 0.1%, following a 0.2% increase in October. Economists had forecast a 0.3% increase.

According to Insee,

• The purchase of food purchases slid by 0.8%, reversing a 0.8% rise in October.
• By contrast, the consumption of manufactured goods increased by 0.5%, following on from a 0.5% rise in October. Energy consumption was also on the rise, jumping by 1.2% to reverse most of a 1.5% slide in October.

Out of Germany, the GfK German Consumer Climate Index fell from 9.7 to 9.6, with both economic and income expectations weighing, while propensity to buy increased in January. While views over the economy remained bleak, the willingness to continue spending will be key for the ECB.

For the Eurozone, the Eurozone’s consumer confidence indicator fell from -7.2 to -8.0 in December, reversing gains from November. In spite of the decline, the indicator remained above the long-term average of -10.6. It was the lowest reading since January, however, when the indicator sat at -8.3%.

From the U.S, economic data was also on the heavier side.

Key stats included finalized 3^rd quarter GDP and November inflation figures along with personal spending and December consumer sentiment numbers.

A pickup in personal spending and a rise in consumer confidence provided support late on, overshadowing the weak numbers from the Eurozone.

The Market Movers

For the DAX: It was a mixed day for the auto sector. Continental and Volkswagen saw red, with losses of 0.84% and 0.19% respectively. BMW and Daimler managed to find support, rising by 0.22% and by 0.09% respectively.

The sector was under pressure through the week following news of BMW and Daimler announcing plans to pull out of the North America market.

It was a bearish day for the banks, however. Commerzbank fell by 0.83%, with Deutsche Bank down by 0.82%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.09% and by 1.05% respectively. Credit Agricole bucked the trend, falling by 0.65%.

It was also mixed for the French auto sector, with Peugeot falling by 0.18%, while Renault rallied by 1.19%.

On the VIX Index

The VIX saw red for a 2^nd consecutive day on Friday, falling by 0.08%. Following a 0.64% decline on Thursday, the VIX ended the day at $12.5.

It was a bullish day for the U.S equity markets as holiday season approaches, with the majors closing out at record highs.

Positive news on the trade front and solid economic data from the U.S pinned back the VIX at the end of the week.

The Day Ahead

It’s a particularly quiet day on the Eurozone economic calendar. There are no material stats due out to provide the majors with direction,

From the U.S, new home sales figures for November are unlikely to have too much of an impact as the markets prepare for the holidays.

On the geopolitical front, there could be a few final tweets and comments from world leaders ahead of the break…

In the futures markets, at the time of writing, the DAX30 was up by 9.5 points, with the Dow up by 14 points.