European Equities: Trump, Service PMIs, and Brexit Updates in Focus

The Majors

It was another mixed day for the European majors on Friday. The DAX30 fell by 0.33% to mark a 4^th consecutive day in the red, while the CAC40 and EuroStoxx600 rose by 0.02% and by 0.25% respectively.

Economic data took a back seat at the end of the week. Market reaction to Trump’s positive COVID-19 test had weighed on the majors ahead of the open.

Progress towards a COVID-19 relief Bill on Capitol Hill and hopes of an end to the Brexit impasse provided support, however.

After a lack of progress but the promise of compromise in 3-days of talks, news of high-level talks planned for the weekend was positive.

Boris Johnson and EU Commission President Ursula von der Leyen were scheduled to speak on Saturday.

The Stats

It was a relatively quiet end to the week on the Eurozone economic calendar.

Key stats included the Eurozone’s prelim inflation figures for September. Following concerns over a pickup in deflationary pressures in August, September’s prelim figures would have provided little comfort.

The Eurozone’s annual rate of core inflation softened from 0.4% to 0.2%. More significantly, however, consumer prices fell by 0.3%, year-on-year, following a 0.2% decline in August.

According to Eurostat,

• Food, alcohol, & tobacco is expected to have the highest annual rate in September (1.8% compared with 1.7% in August).
  • Services are expected to have an annual rate of 0.5% (August: 0.7%).
  • Non-energy industrial goods a rate of -0.3% (August: -0.1%).
  • Energy an annual rate of -8.2% (August -7.8%).
• By member state, Cypress (-2.9%) and Greece (-2.3%) saw the greatest deflationary pressures at the end of the quarter.
• Austria (+1.4%), Lithuania (+1.4%), and Slovakia (+1.4%) are estimated to have the highest annual rate of inflation amongst member states.

Month-on-month, consumer prices rose by 0.1%, partially reversing a 0.4% decline in August.

From the U.S

It was another busy day on the economic calendar. Key stats nonfarm payroll figures and the unemployment rate for September. Factory orders and finalized consumer sentiment figures were also in focus.

The stats were skewed to the negative. While the unemployment rate slipped from 8.4% to 7.9%, the participation rate fell from 61.7% to 61.4%.

In September, the U.S added 661k nonfarm payrolls, which fell short of a forecasted 850k, which was raised concerns over the recovery.

Factory orders also fell short of expectations in August. Orders rose by just 0.7%, following a 6.5% jump in July. Economists had forecast a 1% increase.

On the positive, however, was an upward revision to consumer sentiment and expectation figures.

The Michigan Consumer Sentiment Index was revised from a prelim 78.9 to 80.4. In August, the Index had stood at 74.1.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Continental and Daimler rose by 1.50% and by 0.05% respectively. BMW and Volkswagen saw red, however, with losses of 0.16% and 1.34% respectively.

It was a bullish day for the banks. Deutsche Bank and Commerzbank rose by 2.44% and by 0.96% respectively.

From the CAC, bank stocks were in the red once more. Credit Agricole slid by 1.17%, with BNP Paribas and Soc Gen ending the day down by 0.54% and by 0.09% respectively.

It was a mixed day for the French auto sector. Peugeot fell by 0.65%, while Renault eked out a 0.07% gain.

Air France-KLM followed a 1.25% decline from Thursday, with a 1.81% fall, with Airbus SE ending the day with a 0.43% loss.

On the VIX Index

It was a 4^th consecutive day in the green for the VIX on Friday. Following a 1.25% gain from Thursday, the VIX rose by 3.48% to end the day at 27.63.

News of Trump testing positive for COVID-19 led to the rise in the VIX on the day.

The Dow and S&P500 fell by 0.48% and by 0.96% respectively, while the NASDAQ slid by 2.22%.

The Day Ahead

It’s a busy start to the week on the Eurozone economic calendar.

Key stats include September service sector PMIs for Italy and Spain and Eurozone retail sales figures for August.

Finalized composite and service PMIs are also due out of France, Germany, and the Eurozone.

Barring any major revisions from prelim, Italy and the Eurozone’s PMIs will be the main area of focus.

From the U.S, the market’s preferred ISM Non-Manufacturing PMI will also provide direction late in the session.

Away from the economic calendar, there is plenty for the markets to also consider.

Updates on Trump’s health after being admitted to the hospital will be a key driver alongside Brexit updates. There have been reports of doctors planning to release the President later today. Trump also briefly left the hospital to acknowledge supporters camped outside.

From the weekend, Boris Johnson and EU Commission President Ursula von der Leyen agreed to extend talks by a month. Hopes of compromise and Brexit agreement should provide support.

From Capitol Hill, the markets will also be looking for an agreement on the COVID-19 relief Bill.

The Futures

In the futures markets, at the time of writing, the Dow was up by 204 points, with the DAX up by 95 points.

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