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European Equities: Have the Bulls Run out of Steam?

Bob Mason
The futures are pointing to a mixed open later this morning. Off the back of an extended run, the markets may need the news wires to extend the run.

Economic Calendar:

Monday, 8th April 2019

  • German Trade Balance (Feb)

Tuesday, 9th April 2019

  • N/A

Wednesday, 10th April 2019

  • ECB Interest Rate Decision (Apr)
  • ECB Press Conference

Thursday, 11th April 2019

  • German CPI (MoM) (Mar) Final
  • French CPI (MoM) (Mar) Final
  • French HICP (MoM) (Mar) Final

Friday, 12th April 2019

  • Spanish CPI (YoY) (Mar) Final
  • Spanish HICP (YoY) (Mar) Final
  • Eurozone Industrial Production (MoM) (Feb)

The Majors

It was a bullish start to the 2nd quarter. A 7th consecutive day in the green for the DAX delivered a 4.2% gain for the week. Leading the European majors, the DAX managed to end the day at 12,000 levels for the first time since 5th October.

Elsewhere, the EuroStoxx600 rose by 0.09% on Friday to end the week with a 2.41% gain. The CAC40 rose by 0.23% to end the week up 2.35%.

Economic data out of the Eurozone on Friday was limited to Germany’s industrial production figures for February. After some dire factor order and PMI numbers, a pickup in production provided some, albeit minor support.

Positive updates from both the U.S and China on trade talks supported upward momentum through the week.

Delivering a 7th consecutive day in the green for the DAX was ultimately positive nonfarm payroll figures out of the U.S.

While the CAC40 managed to avoid red through the day, the DAX rally was running out of steam ahead of the U.S labor market figures. A 196k rise in payrolls led to a DAX recovery on Friday. In spite of the day’s gain, the auto sector hit reverse at the end of the week. Volkswagen led the way down on the DAX, falling by 2.58%, with Daimler not too far behind, down by 1.53%.

The slide in the auto sector came off the back of news of the EU Commission charging BMW, Volkswagen, and Daimler with collusion over the car emissions scandal.

It’s not been a good time for Volkswagen who had only just admitted to installing engine software to avoid failing U.S emissions tests. The Commission has accused the German car manufacturers of colluding to prevent the release of clean emissions technology.

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. February trade data due out of Germany is the only data set for the European markets to consider early on in the day.

While forecasts are for the trade surplus to narrow, it could ultimately be the DAX 7-day stretch that pins the majors back.

Progress on trade talks between the U.S and China provided support last week, but the lack of an agreement leaves existing tariffs in place. Economic data out of China showed some improvement in March, but whether momentum can be maintained remains to be seen.

Loan growth figures released out of China this morning showed that new loans came in at CNY885.8bn in March. Forecasts had been for a CNY1.2tn increase off the back of a CNY885bn increase in February.

At the time of writing, the futures pointed to a 35.5 point fall in the DAX and a 13 point rise for the CAC40 at the open.

While the Asian majors responded to Friday’s nonfarm payroll and wage growth figures in the early hours, the U.S futures were also in the red.

Things could change rapidly, however, if British Prime Minister Theresa May announces a presentable deal for Parliament.

This article was originally posted on FX Empire