European Equities: U.S Politics, Brexit, and the Economic Calendar in Focus

For the European majors, the uncertainty had little impact. A Biden victory in the White House remains positive for the majors. There was no Blue Wave, however, leaving the Democrats in minority in the Senate.

The Stats

It was a particularly busy day on the Eurozone economic calendar. Key stats included service PMI figures for Italy and Spain and Spanish unemployment figures.

Finalized service and composite PMIs for France, Germany, and the Eurozone were also in focus.

In Spain, unemployment rose by 49.6k to reverse a 26.3k. The stats had a muted impact with the focus on the U.S Presidential Election.

The PMIs

In October, Spain’s Services PMI fell from 42.4 to 41.4. Economists had forecast a decline to 40.0.

Italy’s Services PMI decreased from 48.8 to 46.7, which was worse than a forecasted decline to 47.0.

The finalized French PMI came in at 46.5, which was in line with prelim, while Germany’s came in at 49.5. This was up from a prelim 48.9. In September, the PMIs had stood at 47.5 and 50.6 respectively.

For the Eurozone, the October services PMI came in at 46.9, which was up from a prelim 46.2, while down from a September 48.0.

The Eurozone’s composite PMI came in at 50.0, which was up from a prelim 49.4. In September, the PMI had stood at 50.4.

From the U.S

Economic data was also on the busier side. Key stats included October’s ISM Services PMI and ADP Nonfarm Employment Change figures.

The ISM Services PMI fell from 57.8 to 56.6 in October. Economists had forecast a fall to 57.5.

• The ISM Services Employment sub-index fell from 51.8 to 50.1.
• New orders grew at a slower pace, with the sub-index falling from 61.5 to 58.8. In spite of this, there was increased demand from overseas, with the New Export Orders sub-index rising from 52.6 to 53.7.

In October, the ADP reported a 365K increase in nonfarm payrolls, following a 749k jump in September. Economists had forecast a 650k rise.

Finalized Markit service and composite PMI numbers and trade data had a muted impact on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Continental and Volkswagen fell by 1.47% and by 1.08% respectively. BMW and Daimler saw relatively modest losses of 0.91% and of 0.18% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 0.80% and by 2.63% respectively.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole saw gains of 0.27% and of 1.24% respectively. Soc Gen bucked the trend on the day, with a 0.25% loss.

It was also a mixed day for the French auto sector. Peugeot rose by 1.86%, while Renault fell by 0.26%.

Air France-KLM fell by 0.38% following a 6.17% jump on Tuesday, while Airbus SE rallied by 3.47%.

On the VIX Index

It was a 3^rd consecutive day in the red for the VIX on Wednesday. Following on from a 4.26 decline on Tuesday, the VIX slid by 16.82% to end the day at 29.57.

On Wednesday, the NASDAQ rallied by 3.85%, with the S&P500 and Dow gaining 2.20% and 1.34% respectively.

The upside for the U.S majors and the downside for the VIX came in spite of continued uncertainty over the outcome of the election.

With the Democrats failing to deliver a “Blue Wave”, tech stocks look to avoid avoided a tax increase.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include German factory orders and Eurozone retail sales figures for September.

From the U.S, weekly jobless claims and 3^rd quarter nonfarm productivity and unit labor cost figures are due out.

Expect Germany’s factory orders and the weekly jobless claims figures from the U.S to have the greatest influence.

While the stats will provide direction, U.S Presidential Election results will continue to be a key driver on the day.

Recounts and lawsuits will keep the markets interested for a while longer, with the winner yet to be declared.

On the monetary policy front, the FED is also in action after the European close. While there’s unlikely to be a move this time around, the FED may need to assure the markets of the willingness for more. The onus may now fall back on the FED should Biden win the race, with the Republicans holding the Senate.

Away from the economic calendar, Brexit may also garner some interest on the day.

The Futures

In the futures markets, at the time of writing, the Dow was up by 58 points.

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