UK markets closed

European Equities: Economic Data and Politics in Focus

Bob Mason

Economic Calendar:

Thursday, 26th September

  • GfK German Consumer Climate (Oct)
  • ECB Economic Bulletin

Friday, 27th September

  • French Consumer Spending (MoM) (Aug)

The Majors

The European majors struggled for a 3rd consecutive day on Wednesday. Leading the way down was the CAC40, which declined by 0.79%. DAX30 and EuroStoxx600 weren’t far behind, with losses of 0.59% and 0.58% respectively.

It was bearish from the get-go, as geopolitical risk gripped the Asian and European markets following the overnight reversal in the U.S.

Not only was there a change in tone from the U.S President on trade, but there was also the news of Trump facing an impeachment inquiry.

The U.S President had managed to survive the post-Presidential Election investigation, but this time around the Democrats smell blood. The timing was certainly interesting when considering the UK Supreme Court ruling that went against Boris Johnson…

News from both sides of the pond was negative for the European majors and riskier assets in general. The news comes at a time of heightened market sensitivity, following particularly dire private sector PMI numbers at the start of the week.

The Stats

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

A lack of stats left the markets transfixed on political events in the U.S and in the EU, and Britain in particular.

From the U.S, economic data was limited to August new home sales that had a muted impact on the majors.

The Market Movers

From the DAX, autos found support on Wednesday, with Volkswagen and Continental leading the way, rising by 1.48% and 1.31% respectively. Daimler wasn’t far behind with a gain of 0.69%, while and BMW rose by just 0.06%.

Banks also found support. Deutsche Bank gained 0.74%, while Commerzbank rallied by 2.13%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen fell by 0.51% and 0.38% respectively. Credit Agricole bucked the trend on the day, rising by 0.41%. The auto sector also closed out the day in the red, however. Renault fell by 1.32%, whilst Peugeot slid by 1.53%.

On the VIX Index

The VIX Index resumed its downward trend on Wednesday, falling by 6.43% to close out the day at 16.0.

It was a mixed day for the markets, with geopolitical risk weighing ahead of news hitting the wires of yet another shift in trade war rhetoric.

News of China preparing to import more U.S pork coupled with the U.S President suggesting that a China trade deal was possible sent the U.S equity markets into positive territory.

Whether diversion from the impeachment story or not, the trade war rollercoaster continued and will likely remain as the key market driver. That is assuming that the U.S President is not impeached and ousted from office…

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. German GfK consumer climate figures for October are due out in the early part of the day.

While we would expect consumer sentiment to have an influence, it will ultimately boil down to geopolitical news on the day.

The ECB’s economic bulletin, which is due out later in the day, is unlikely to deliver too many surprises to rock the boat.

From the U.S, a busy economic calendar will influence late in the session. Barring a deviation from 2nd estimate figures, 3rd estimate GDP numbers should have a muted effect, however. August trade data, pending home sales and the weekly jobless claims, will be in focus.

In the futures markets, at the time of writing, the DAX was up by 27.5 points, while the Dow Mini was up down 17 points.

This article was originally posted on FX Empire