UK markets open in 1 hour 56 minutes

European Equities: Will the Stats Spoil the Party? It’s Nonfarm Payrolls…

Bob Mason

Economic Calendar:

Friday, 6th September

  • German Industrial Production m/m (Jul)
  • Eurozone GDP y/y (Q2) 3rd Estimate
  • Eurozone GDP q/q (Q2) 3rd Estimate

The Majors

It was a second day in the green for the majors, as a combination of easing in geopolitical risk and positive economic data spurred the majors on.

Leading the way on Thursday was the CAC40, which rallied by 1.11%. The DAX30 and EuroStoxx600 rose by 0.85% and 0.72% respectively.

The stars were aligned on the geopolitical front. News of trade talks resuming next month and Parliament’s blocking of a no-deal Brexit were key to the upswing.

From Italy, the aversion of a snap general election was also a plus, supporting the Italian markets mid-week.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. July factory orders figures, out of Germany, were in focus in the early part of the day.

According to Destatis,

  • Factory orders tumbled by 2.7% in July, month-on-month, reversing a revised 2.7% rise in June. Economists had forecasted for orders to fall by 1.5%.
  • Domestic orders fell by 0.5%, whilst foreign orders slid by 4.2%, month-on-month.
  • New orders from the euro area were up 0.3%. New orders from other countries, however, were down by 6.7%.
  • For consumer goods, new orders fell by 2.4%, with orders for capital goods falling by 3%. New orders for intermediate goods also saw red, falling by 2.2%.
  • Year-on-year, new orders tumbled by 5.6%.

From the U.S, ADP nonfarm employment change, July factory orders, and August ISM Non-Manufacturing PMI figures provided direction.

ADP numbers impressed, with nonfarm payrolls rising by 195K in August.

Factory orders also provided support, with orders up by 1.4% in July following a 0.6% rise in June.

Of greater significance, however, was a jump in the ISM Non-Manufacturing PMI. The PMI rose from 53.7 to 56.4 in August.

Positive numbers out of the U.S and the material shift in the geopolitical landscape were enough to offset the dire numbers out of Germany.

The Market Movers

From the DAX, positive news on trade talks supported ThyssenKrupp and Infineon Tech, which led the way on the day. The pair rallied by 6.36% and 5.4% respectively. Bank stocks were also at the top of the index supported by better than expected economic data. Deutsche Bank and Commerzbank jumped by 4.84% and 3.92% respectively.

For the auto sector, Continental and Daimler led the way with the pair rising by 4.98% and 3.36%. BMW and Volkswagen saw more modest gains of 1.81% and 1.66% respectively.

From the CAC, it was also a bullish day for the banks. Soc Gen led the way, rallying by 3.49%. Credit Agricole and BNP Paribas weren’t far behind with gains of 2.79% and 2.92% respectively. From the auto sector, Renault and Peugeot rose by 3.26% and 3.62% respectively.

On the VIX Index

The VIX Index saw red for a 3rd consecutive day on Thursday, falling by 6.12% to end the day at 16.3.

While economic data provided support, geopolitics was the story of the day, providing much-needed market relief.

Risks remain but have certainly eased as the week progressed.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. July industrial production figures are due out of Germany in the early part of the day. Later in the session, 3rd estimate GDP numbers for the Eurozone are also due out.

Barring deviation from 2nd estimates, Germany’s industrial production figures will have the greatest influence on the majors.

Later in the day, economic data out of the U.S will also provide direction. Nonfarm payroll and wage growth figures will be in focus later this afternoon.

Outside of the stats, it’s Friday and, while Trump traditionally shocks the markets, the news wires may well do the talking.

From the UK, legislation to block a no-deal Brexit is expected to be approved ahead of next week’s suspension of Parliament. The question, however, is whether the British PM will go to the EU and request an extension. There’s also the possibility of the EU refusing the extension… A passing of the Bill would, at least, open the door for another motion for a 15th October general election, but even that is up in the air…

In the futures markets, at the time of writing, the DAX was up by 10.5 points, with the Dow Mini was up by 73 points.

This article was originally posted on FX Empire