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European Equities: A Busy Economic Calendar and Brexit in Focus

Bob Mason

Economic Calendar:

Friday, 13th September

  • Spanish CPI y/y (Aug) Final
  • Spanish HICP y/y (Aug) Final
  • Wages in eurozone y/y (Q2)
  • Eurozone Trade Balance (Jul)

The Majors

On Thursday, the ECB failed to disappoint, providing the monetary policy stimulus to support the region’s economy.

The combination of trade optimism, monetary policy stimulus and talk of fiscal stimulus out of Germany continued to deliver for the DAX30.

The DAX30 rose by 0.41% to mark a 6th consecutive day in the green. The upside came in spite of a EUR recovery from sub-$1.10 levels.

For the CAC40 and EuroStoxx600, the pair closed out the day with gains of 0.44% and 0.20% respectively.

The Stats

It was a busy day on the Eurozone economic calendar on Thursday. Key stats included finalized inflation figures out of Germany and Spain. European industrial production figures for July were also in focus.

While inflation figures provided few surprises, disappointing industrial production figures failed to test the majors ahead of the ECB monetary policy decision.

According to Estatis, industrial production fell by 0.4% in July, month-on-month, following on from a 1.6% slide in June.

  • Production of non-durable consumer goods fell by 0.8%, energy by 0.8% and intermediate goods by 0.3%.
  • By contrast, the production of durable consumer goods and capital goods rose by 1.2% and by 1.8% respectively.
  • Estonia (-2.9%) and Latvia (-2.1%) reported the largest falls in production, while Portugal (+3.6%) recorded the largest increase.
  • Year-on-year, industrial production fell by 2.0%.

From the U.S, August inflation figures impressed. The annual rate of core inflation accelerated from 2.2% to 2.4%, coming in ahead of a forecast of 2.3%.

Whilst providing support to the Greenback, the numbers did test the European majors, which slid into the red from day highs before recovering.

Ironically, Trump had decided to call the ECB a currency manipulator in spite of his attempts at coercing the FED into delivering negative rates.

In true European style, the Draghi simply stated that the ECB does not target the exchange rate, period…

From the market perspective, while the 10 basis point deposit rate cut was anticipated, it was the asset purchasing component that was key. The ECB reintroduced a €20bn per month program for an unspecified period.

The Market Movers

From the DAX, the auto sector delivered a mixed bag. BMW and Daimler were amongst the front runners with gains of 0.86% and 0.67% respectively. Volkswagen wasn’t far behind with a 0.57% gain, while Continental bucked the trend, falling by 0.78%.

It was also a mixed day for the banks on Wednesday. Deutsche Bank slipped by just 0.07%, while Commerzbank rose by 0.47%.

From the CAC, it was also a mixed day for the banks. Credit Agricole bucked the trend on the day, rising by 0.22%. BNP Paribas and Soc Gen joined Deutsche Bank in the red, with losses of 0.0.15% and 0.41% respectively. There was nothing mixed for the auto sector, however. Renault rose by 0.27%, with Peugeot gaining 2.03%.

On the VIX Index

The VIX Index saw red for a 7th day in 8 on Thursday, falling by 2.74% to end the day at 14.2.

ECB monetary policy stimulus and an easing in tensions between the U.S and China continued to pin back the VIX.

The Day Ahead

It’s another busy day on the Eurozone economic calendar. Finalized August inflation figures out of Spain are due out along with 2nd quarter Eurozone wage growth and July trade data.

Following the ECB’s u-turn on monetary policy, the numbers will need to be particularly dire to have a material influence.

The focus will be on U.S retail sales figures later in the day. While the ECB delivered and the FED is expected to deliver, any material slide in retail sales could trigger a sell-off.

In the futures markets, at the time of writing, the DAX was down by 7 points, with the Dow Mini down by 2 points.

This article was originally posted on FX Empire