European Equities: U.S Futures Point to another Day of Pain

The CAC40 fell by 1.59% to lead the way down, with the DAX30 and the EuroStoxx600 ending the down by 1.01% and by 1.15% respectively.

Once more, the U.S tech sector left the majors deep in the red as the tech rout resumed.

In the early part of the day, the majors had been in positive territory before the reversal began ahead of the U.S open.

Negative sentiment towards Brexit and continued tensions between the U.S and China contributed to the downside on the day.

The Stats

It was a busier day on the Eurozone economic calendar. Key stats included French nonfarm payroll and German trade figures, along with finalized 2^nd quarter GDP numbers for the Eurozone.

In the 2^nd quarter, non-farm payrolls fell by 0.9% according to finalized figures, which was down from a prelim 0.6% fall. In the 1^st quarter, payroll had declined by 2.0%.

German Trade Data

From Germany, the trade surplus widened from €14.5bn to €18.0bn in July. Economists had forecast a widening to €16.0bn.

According to Destatis,

• Exports rose by 4.7% from the previous month, while down by 11% from the same month a year earlier.
• Imports rose by 1.1% from the previous month and were down by 11.3% from the same month a year earlier.
• When compared with pre-shutdown February 2020, exports were down by 12.1% and imports by 11.5%.

The details:

• In July 2020, Germany exported goods to the value of €52.4bn to EU member states, while importing goods to the value of €44.4bn.
• Goods to the value of €36.8bn (-10.7%) were exported to the euro area countries, while goods imported fell by 13.1% to €30.1bn.
• Exports to EU countries outside of the Eurozone fell 7% to €15.6bn, while imports fell 4.2% to €14.3bn.
• To countries outside of the EU, exports fell 12.5% to €49.9bn, with imports falling by 1.2% to €38.7bn.

Destatis also looked at the impact of the COVID-19 pandemic on German trade terms…

• Exports to China fell by just 0.1% to €8.7bn compared with July 2019.
• To the U.S, however, exports slumped by 17% to €9.3bn.
• Exports to the UK also took a heavy hit, falling by 12.6% to €5.5bn.

The Eurozone Economy

From the Eurozone, the economy contracted by 11.8% in the 2^nd quarter, according to finalized figures. This was up from a prelim 12.1% contraction. In the 1^st quarter, the economy had contracted by 3.6%.

Year-on-year, the economy contracted by 14.7%, which was also revised up from a prelim 15.0%. In the 1^st quarter, the economy had contracted by 3.1%.

According to Eurostat,

• By member state, Spain had the sharpest decline, contracting by 18.5%, quarter-on-quarter.
• Greece (-14.0%), Portugal (-13.9%), and France (-13.8%) were also amongst the worst hit by COVID-19, economy-wise.
• By contrast, Finland (-4.5%), Lithuania (-5.5%), and Estonia (-5.6%) were the least affected economically.

GDP Components:

• Household final consumption slumped by 12.4%, following a 4.5% slide in the previous quarter.
• Gross fixed capital formation tumbled by 17.0%, following a 5.2% slide from the previous quarter.
• Exports declined by 18.8%, with imports falling by 18.0%.

GDP Contributions:

• Household final consumption deducted 6.6 percentage points from GDP.
• Gross fixed capital formation deducted 3.8 percentage points from GDP.

From the U.S

There were no stats to consider, leaving chatter from Washington and the U.S markets to provide direction.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Tuesday. BMW and Daimler rose by 0.59% and 0.43% respectively. Continental and Volkswagen saw red, however, falling by 2.26% and by 0.33% respectively.

It was a bearish day for the banks, however. Deutsche Bank fell by 1.70%, with Commerzbank sliding by 3.75%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole both fell by 2.61. Soc Gen led the way down, however, sliding by 3.76%.

It was a mixed day for the French auto sector. Peugeot rose by 0.58%, while Renault slipped by 0.04%.

Air France-KLM ended the day down by 2.43%, with Airbus SE sliding by 4.05%

On the VIX Index

It was back into the green for the VIX on Tuesday. Partially reversing an 8.48% slide from Friday, the VIX rose by 2.31% to end the day at 31.46.

The upside came as the U.S majors continued to hit reverse. It was tech stocks once more that weighed on the broader market, leading to the upside on the VIX.

The NASDAQ slid by 4.11% to lead the way down. The Dow and S&P500 saw relatively more modest losses of 2.25% and 2.78% respectively.

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone ahead of the ECB’s monetary policy decision tomorrow.

The lack of stats will leave the majors in the hands of geopolitics and inflation figures from China. China’s inflation figures are due out ahead of the European open this morning.

On the geopolitical front, chatter from Beijing and Washington and updates on Brexit will need monitoring on the day.

The Futures

In the futures markets, at the time of writing, the Dow was down by 73 points.

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