European Equities: Trade Woes Could Reignite Concerns over the Economy…Eurozone industrial production figures and any further comments from Beijing or the U.S on trade will be key on the day.
Thursday, 13th June
- German CPI m/m (May) Final
- Eurozone Industrial Production m/m (Apr)
Friday, 14th June
- French CPI m/m (May) Final
- French HICP m/m (May) Final
- Italian CPI m/m (May) Final
The European majors saw red for the 1st time this week. Leading the way down was the CAC40, which fell by 0.62%. For the DAX30 and EuroStoxx600, the losses were more modest. The DAX30 fell by 0.33%, with the EuroStoxx600 ending the day with a 0.3% loss.
Support from the U.S – Mexico agreement ran out of steam on Wednesday, with the markets reacting to the latest U.S – China trade war news.
At the start of the week, Trump had threatened to rollout tariffs on an additional $300bn worth of Chinese goods should Premier Xi fail to attend the G20 Summit.
China responded on Wednesday, promising to react with tough measures should the U.S take further steps against China.
Economic data was on the lighter side on Wednesday. Stats included French 1st quarter nonfarm payroll figures and finalized Spanish inflation numbers.
A larger than forecast 0.4% rise in nonfarm payrolls had a muted impact on the majors. Forecasts were for a 0.3%, quarter-on-quarter, rise following a 0.3% increase in the 4th quarter of last year.
Spain’s inflation figures also failed to provide direction, in spite of an easing in inflationary pressures. The annual rate of inflation eased from 1.5% to 0.8% in May, which was in line with prelim figures. Baseline inflation held steady at 0.9%, which was also in line prelim figures.
The markets had been expected inflationary pressures to ease in May and possibly further in June as oil prices continue to slide.
From the U.S, there was a similar trend, with the annual rate of core inflation easing back from 2.1% to 2.0% in May. Forecasts were for baseline inflation to hold steady at 2.1%. Month-on-month, core consumer prices rose by just 0.1%, as did headline consumer prices.
With the markets already having reacted to the FED Chair’s chatter last week, there was little support from the numbers. The latest U.S inflation figures now question whether a single rate cut will be enough…
The Market Movers
From the DAX, the auto sector hit reverse over the shift in sentiment towards trade. Continental led the way down, falling by 1.28%. Daimler (-0.53%), BMW (-0.48%) and Volkswagen (-1.13) also saw red on the day.
Things were not much better in the banking sector, with Deutsche Bank and Commerzbank falling by 0.83% and by 1.6% respectively.
From the CAC40, BNP Paribas and Credit Agricole fell by 1.0% and 1.19% respectively, with Renault also seeing red, falling by 1.31%.
With oil prices on the slide, Total was amongst the heaviest losers on the day, sliding by 2.73%.
The Day Ahead
Finalized German inflation figures are due out later this morning along with the Eurozone’s industrial production numbers for April.
German consumer prices are forecasted to rise by 0.2%, which is in line with prelim, while well below a 1% rise in April.
We would expect the inflation figures to continue to have a muted impact on the majors. The Eurozone’s industrial production figures will likely influence, however. Eurozone industrial production is forecast to fall by 0.5% in April, following a 0.3% decline in March.
Anything worse than forecast would add further pressure on the majors. The latest trade rhetoric will have the majors more sensitive to the numbers.
From the U.S, barring dire weekly jobless claims figures, import and export price data are unlikely to have a material impact.
The markets will need to continue to look out for any trade war chatter, however…
At the time of writing, the DAX was down by 7 points. The Dow Mini was up by 6 points.