European Equities: German Stats, Brexit and Trade Talks in Focus

While we can expect German trade figures to influence, geopolitical risk remains the key driver. Pessimism weighed early in the day…
Bob Mason
Global financial markets

Economic Calendar:

Thursday, 10th October

  • German Trade Balance (Aug)

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was back in the green for the majors on Wednesday, with the DAX30 rallying by 1.04% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 0.78% and 0.42% respectively.

The trade war pendulum once more swung in favor of the global equity markets. News of China being open to an agreement on the basis that no further tariffs are introduced provided support on the day.

Further tariffs on Chinese goods are due to be rolled out next week and at the end of the year.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday. There were no material stats to provide the European majors with direction on the day.

With economic data from the U.S limited to August JOLTs job openings, geopolitics remained the key driver on the day.

The Market Movers

For the DAX: There was finally some support for the auto sector, with Daimler rallying by 2.5% to lead the way. BMW (+1.09%), Continental (+0.49%), and Volkswagen (+0.97%) also found support from fresh optimism on trade talks.

Bank stocks continued to struggle, however, with Deutsche Bank rising by just 0.16% and Commerzbank falling by 0.15%

Adidas led the way on the day, rallying by 3.26%, with the shift in sentiment towards the U.S – China trade talks delivering the upside.

From the CAC, it was somewhat better for the banks. Soc Gen led the way, rising by 0.48%. BNP Paribas and Credit Agricole saw more modest gains of 0.39% and 0.05% respectively. For the autos, Renault rose by 0.20%, with Peugeot gaining 0.90%.

On the VIX Index

The VIX Index saw red on Wednesday, falling by 8.09%. Partially reversing a 13.55% fall from Tuesday, the VIX ended the day at 18.6.

Yet another shift in sentiment towards today’s resumption of trade talks provided support to the equity markets, to pin back the VIX.

There’s a lot riding on this week’s talks, which leaves the majors exposed to the prospect of heavy falls should trade talks fail to deliver an agreement.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German trade data for August is due out ahead of the European open.

Following a mixed set of stats earlier in the week, we can expect the figures to influence going into the open.

With the lingering threat of U.S tariffs on EU goods, Germany’s economy would be hard hit from such an eventuality.

From the U.S, September inflation figures are also due out but will likely have a muted impact on the majors, barring a material pickup in inflationary pressure.

Outside of the stats, expect updates from Brexit and U.S – China trade talks to also influence on the day.

We would expect market sensitivity to the U.S – China trade talks to be greatest over the course of the session.

In the futures market, at the time of writing, the DAX30 was down by 52.5 points, with the Dow down by 169 points.

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