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The Majors

It was a day in the red for the majors on Thursday. The CAC40 led way down, falling by 0.62% to end the month up by just 0.92%. Things were not much better for the EuroStoxx600, which fell by 0.49% to also end the month up by 0.92%. The DAX30 fared somewhat better, falling by 0.34% to end the month of October up by 3.53%.

Geopolitical risk pressured the majors on Draghi’s final day at the ECB. News of China having doubts over the possibility of a longer-term trade agreement with the U.S did the damage on Thursday.

The negative sentiment impacted in spite of U.S President Trump continuing to deliver positive signals over phase 1 of an agreement.

There was no Brexit chatter to impact as Boris Johnson and the main contenders entered their first day of campaigning.

The Stats

It was a busy day on the Eurozone economic calendar on Thursday. Key stats German retail sales figures and the Eurozone’s 3rd quarter GDP and prelim October inflation figures. There was also the Eurozone’s unemployment rate to consider.

Prelim October inflation figures out of France and Italy and Spanish GDP numbers had a muted impact on the day.

From Germany, retail sales rose by just 0.1% in September, month-on-month, following a 0.1% decline in August. Economists had forecast a 0.3% rise. According to Destatis, retail sales increased by 3.4% in the same month a year earlier.

Out of the Eurozone,

The economy grew by 0.2% in the 3rd quarter, quarter-on-quarter, which was at the same pace as in the 2nd quarter. Economists had forecast 0.1% growth. According to Eurostat,

  • Year-on-year, the GDP rose by 1.1%, which was in line with forecasts, whilst easing from 1.2% in the 2nd

The Eurozone’s unemployment rate held steady at 7.5% in September, while down from 8.0% in September 2018. This was the lowest rate recorded in the Eurozone since July 2008.

According to Eurostat,

  • Germany had the lowest unemployment rate at 3.1%, while Greece (16.9% in July) and Spain (14.2%) had the highest unemployment rates.
  • Year-on-year Greece saw the largest fall in unemployment, with the unemployment rate falling from 19.1% to 16.9%.
  • Cyprus (from 8.0% to 6.6%) and Estonia (from 5.3% to 3.9%) also saw sizeable declines in unemployment.
  • Lithuania was the only member state to report an increase, rising from 6.3% to 6.5%.

Prelim October inflation figures were mixed, however.

According to Eurostat,

  • The Eurozone’s annual rate of inflation eased from 0.8% to 0.7% in October. By contrast, the annual core rate of inflation picked up from 1.0% to 1.1%.
  • Support came from services, with the annual rate of inflation estimated to rise from 1.5% to 1.6%.
  • Alcohol & tobacco (1.6% unchanged) and non-energy industrial goods (up from 0.2% to 0.3%) also provided support.
  • A more marked fall in energy prices, -3.2% compared with -1.8% in September, weighed on the headline number.

Later in the day, economic data out of the U.S had a more muted impact as the markets responded to chatter on trade.

The Market Movers

For the DAX: It was a bearish day for the auto sector, as negative sentiment towards trade weighed. Volkswagen led the way, falling by 2.14%. Continental and Daimler weren’t far behind, with losses of 1.50% and 1.30% respectively. BMW saw a more modest loss of 1.07%.

Things were not much better for the banks, with Commerzbank falling by 1.11% and Deutsche Bank falling by a further 2.36%. On Wednesday, disappointing earnings results had left Deutsche Bank with a 7.43% loss.

From the CAC, it was yet another day in the red for the banks. Soc Gen and BNP Paribas fell by 0.90% and by 0.26% respectively, with Credit Agricole down by 0.09%.

BNP Paribas saw red in spite of better than forecasted corporate earnings results.

It was also bearish for the autos. Peugeot reversed Wednesday’s 4.53% gain with a 12.86% tumble, while Renault slid by 3.49% on the day.

Fiat Chrysler got the support of the market as merger talks between Fiat Chrysler and PSA Peugeot Citroen got underway. Fiat Chrysler shares rose by 8.22% in Europe and by 2.27% on the NYSE.


On the VIX Index

The VIX Index returned to positive territory on Thursday, rising by 7.22%. Reversing a 6.59% decline from Wednesday, the VIX ended the day at 13.2.

Negative sentiment towards trade provided the support on the day, as the U.S major indexes closed out the day in the red.

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the European majors with direction.

A lack of stats puts economic data out of the U.S in focus, with October nonfarm payrolls and wage growth due out later today.

We can expect October ISM manufacturing PMI numbers to also influence on the day.

On the geopolitical risk front, the markets will also be influenced by any chatter on trade, which would overshadow any positive corporate earnings results.

Earlier in the day, China’s all influential Caixin Manufacturing PMI rose from 51.4 to 51.7 in October to provide some early support.

In the futures market, at the time of writing, the DAX30 was up by 41 points, with the Dow up by 56 points.

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