European Equities: U.S Economic Data, U.S Politics, and COVID-19 in Focus

The Majors

It was a bearish start to the week for the European majors on Monday. The DAX30 slid by 3.71%, with the EuroStoxx600 and CAC40 declining by 1.81% and by 1.90% respectively.

Disappointing business sentiment figures for Germany sent the DAX30 into the deep south on a bearish day for riskier assets.

The market reaction towards the constant surge in new COVID-19 cases across the EU had weighed heavily going into the open.

Adding to the market angst on the day was the lack of progress towards a U.S stimulus package on Capitol Hill.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. Key stats included Germany’s Ifo Business Climate Index and sub-index figures for October.

The Business Climate Index fell from 93.2 to 92.7 in October, with the Business Expectations sub-index falling from 97.4 to 95.0. Sentiment towards the current situation was marginally better, with the sub-index rising from 89.2 to 90.3.

According to the October report,

• The Business Climate Index fell for the first time in 6-months. A continued rise in new COVID-19 cases weighed on business sentiment.

By sector:

• In manufacturing, the business climate indicator moved back into positive territory for the 1^st time since June-19. The pickup came in spite of waning optimism.
• In services, the business climate deteriorated notably. Optimism towards the business outlook disappeared, with firms also less satisfied with their current situation.
• In trade, the Business Climate Index fell marginally. While firms were more pessimistic, companies were more satisfied with their current business situation.

From the U.S

It was also a quiet day on the economic calendar. New home sales figures for September had a muted impact on the European majors.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector on Monday. Continental and Volkswagen slid by 3.29% and by 2.29% respectively, with Daimler and BMW falling by 1.08% and by 1.07% respectively.

It was also a bearish day for the banks. Deutsche Bank fell by 0.36%, with Commerzbank sliding by 2.80%

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 1.64% and by 1.30% respectively. Credit Agricole slid by 2.16%, however, to lead the way down.

It was another mixed day for the French auto sector. Peugeot rose by 0.42%, while Renault declined by 1.70%.

Air France-KLM slid by 4.04%, with Airbus SE ending the day with a 4.44% loss.

On the VIX Index

A run of 3 consecutive days in the red came to an end for the VIX on Monday. Reversing a 1.99% fall from Friday, the VIX surged by 17.82% to end the day at 32.46.

COVID-19 updates and a lack of progress towards a U.S Stimulus package weighed heavily on riskier assets on the day.

New COVID-19 cases across the U.S also hit record highs raising concerns that the U.S may need to reintroduce lockdown measures.

On Monday, the Dow slid by 2.29%, with the NASDAQ and S&P500 seeing losses of 1.64% and 1.86% respectively.

The Day Ahead

It’s a quiet day on the Eurozone economic calendar. Key stats include jobseeker total figures out of France. Barring particularly dire numbers, however, the figures should have a muted impact on the majors.

From the U.S, it’s a busier day ahead, with core durable goods and consumer confidence in focus. Expect the numbers to influence late in the European session.

While the stats will provide direction, COVID-19, Brexit, and U.S politics may well overshadow the numbers on the day.

The Futures

In the futures markets, at the time of writing, the Dow was up by 85 points, with the DAX up by 27.5 points.

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