European Equities: Trump’s Next Move, COVID-19, and Brexit in Focus

The Majors

It was a bearish end to a bullish week for the European majors, with the DAX30 falling by 0.70% to lead the way down. Losses were more modest for the CAC40 and the EuroStoxx600, which fell by 0.46% and by 0.20% respectively.

Economic data continued to take a back seat once more, with the markets responding to the FED and U.S Presidential Election updates.

While Joe Biden was leading the election race, some degree of uncertainty over the outcome remained.

As the vote count in the U.S continued, a return to focus on the 2^nd wave of the COVID-19 pandemic also weighed.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. Key stats included German industrial production figures.

In September, industrial production rose by 1.6%, following a 0.5% rise in August. Economists had forecast a 2.7% rise.

According to Destatis,

• Production in industry, excluding energy and construction, was up by 2.0%.
• Within industry, the production of intermediate goods rose by 1.4%, with the production of consumer goods rising by 3.0%.
• The production of capital goods increased by 2.2%.
• Outside industry, energy production was down by 2.5%, while production in construction rose by 1.5%.
• Production in the automotive industry jumped by 10.0%, reversing a 10.3% slide in August.
• Compared with February 2020, the month prior to COVID-19 restrictions, production was down by 8.4%

From the U.S

Economic data was also on the busier side. Key stats included October nonfarm payrolls and unemployment figures.

In October, the U.S added 638k nonfarm payrolls in October, following a 672k increase in September.

With the pickup in payrolls, the unemployment rate fell from 7.9% to 6.9%. Marginally improving labor market conditions saw more people look for work. As a result, the participation rate rose from 61.4% to 61.7%.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Friday. BMW and Daimler fell by 1.06% and by 1.59% respectively to lead the way down. Continental and Volkswagen saw more modest losses of 0.70% and of 0.90% respectively.

It was a mixed day for the banks. Deutsche Bank rose by 0.77%, while Commerzbank fell by a further 0.7% following Thursday’s 5.75% slide.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.92% and by 1.48% respectively. Soc Gen saw a more modest 1.12% loss on the day.

It was also a bearish day for the French auto sector. Peugeot and Renault fell by 2.66% and by 3.16% respectively.

Air France-KLM fell by 2.19%, with Airbus SE ending the day down by 0.54%.

On the VIX Index

It was a 5^th consecutive day in the red for the VIX on Friday. Following on from a 6.73% fall on Thursday, the VIX slid by 9.86% to end the day at 24.86.

On Friday, the NASDAQ eked out a 0.04% gain, while the S&P500 and Dow fell by 0.03% and by 0.24% respectively.

Economic data from the U.S took a back seat, with the markets continuing to eye the Presidential Election vote count.

Going into the weekend, there had been no outcome to the Presidential Election. Vote counts continued, with Trump calling for recounts and filing lawsuits. As a result of some degree of uncertainty, the week-long rally hit pause at the end of the week.

It was not enough, however, to support a rebound in the VIX, with the markets anticipating a Biden victory and a Republican Senate.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats include German trade figures for September.

We don’t expect too much influence from the numbers, however. On the monetary policy front, ECB President Lagarde is scheduled to speak. Forward guidance would influence, though Lagarde has tended to avoid policy talk of late.

Therefore, expect the focus to be on U.S politics, Brexit, and COVID-19 news updates.

From the U.S, Biden’s victory will support the majors as the focus shifts focus to Trump’s legal battles, recounts, and the Senate race. From Europe, we can expect updates on Brexit to also influence.

While COVID-19 and geopolitics will likely remain the key drivers, economic data from the weekend should provide some support.

China reported an 11.4% jump in exports in October. A more modest 4.7% rise in imports led to a widening of the U.S Dollar trade surplus from $37bn to $58.44bn.

The Futures

In the futures markets, at the time of writing, the Dow was up by 324 points, with the DAX up by 173.5 points.

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