European Equities: Will U.S Non-Farm Payrolls Deliver for the Majors?While economic data out of Germany will provide direction, it’s all about today’s U.S nonfarm payrolls. It’s make or break for the majors…
Friday, 5th July
- German Factory Orders m/m (May)
- German Industrial Production m/m (May)
The European majors saw green once more, with the DAX leading the way with a 0.11% gain on Thursday. For the CAC40 and EuroStoxx600, the gains were more modest. The pair rose by 0.03% and by 0.09% respectively.
With the U.S markets closed for Independence Day, trading volumes were lighter on the day.
For the DAX30, it was a 7th consecutive day in the green.
Economic data out of the Eurozone was on the lighter side on the day.
The Eurozone’s May retail sales figures had a limited impact on the majors. Retail sales fell by 0.3% in May, month-on-month, which was worse than a forecasted 0.4% rise. In April, sales fell by 0.1%. According to Eurostat,
- Automotive fuel sales fell by 1.3%, with the sale of food, drinks, and tobacco falling by 0.5%. The sale of non-food products fell by 0.1%.
- By member state, Lithuania (-3%) recorded the largest fall in retail sales.
- Compared with May 2018, retail sales increased by 1.3%.
- Non-food sales jumped by 2.2%. While the sale of food, drinks, and tobacco remained unchanged, the sale of automotive fuel fell by 0.3%.
- By member states, Luxembourg (+7.4%), Ireland (+7.0%) and Slovenia (+5.6%) reported the highest retail sales figures.
With the U.S markets closed in commemoration of Independence Day, there were no stats out of the U.S to provide direction. The lack of stats continued to support the dovish outlook on FED monetary policy, with the markets pricing in a July rate cut.
The Market Movers
From the DAX, Deutsche Bank was amongst the front runners once more on Thursday, rising by 0.92%. Commerzbank saw a more modest 0.03% gain on the day. It was a better day for the auto sector. Continental led the way with a 0.79% gain. BMW and Volkswagen rose by 0.53% and by 0.48% respectively, while Daimler gained 0.37%.
Support from Deutsche Bank continued on Thursday as news of a restructuring plan to its investment banking business did the rounds. The chatter followed on from news on Wednesday of talks being held with a number of banks on the sale of certain segments of its equities business.
From the CAC, BNP Paribas and Credit Agricole rose by 1.12% and 0.36% respectively, while Renault gained 0.06% on the day.
From the EuroStoxx600, UniCredit SpA was amongst the biggest risers on the day, gaining 4.96%. The rally came off the back of news of the Italian coalition government delivering the EU Commission an acceptable plan to rein in debt.
The Day Ahead
It’s a relatively busy day ahead, with economic data out of the Eurozone including German industrial production and factory order numbers for May.
While we can expect some direction from the numbers, the real focus will be on the U.S nonfarm payroll and wage growth numbers due out later in the day.
The markets had been clinging onto the hope of a quick resolution to the U.S – China trade war and support from the FED.
While talks are due to continue into next week, hopes of a quick resolution have abated, which leaves the FED rate cut the key support. Positive numbers could hurt on the day.
Anything north of 150k new jobs added and an upward revision to May figures would be considered a decent set of numbers. Wage growth would need to be in line with focus, however.
On the geopolitical front, there’s also Iran to consider as tensions between the U.S and Iran continue to build.
At the time of writing, the DAX was down by 3 points. The Dow Mini was up by 11 points.