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European Equities: A Lack of Economic Data Leaves Coronavirus Updates and Geopolitical Risk in Focus

Bob Mason

Economic Calendar:

Wednesday, 12th February 2020

Eurozone Industrial Production (MoM) (Dec)

Thursday, 13th February 2020

German CPI (MoM) (Jan) Final

Friday, 14th February 2020

German GDP (QoQ) (Q4) 1st Estimate

German GDP (YoY) (Q4) 1st Estimate

Spanish CPI (YoY) (Jan) Final

Spanish HICP (YoY) (Jan) Final

Eurozone GDP (QoQ) (Q4) 2nd Estimate

Eurozone GDP (YoY) (Q4) 2nd Estimate

Eurozone Trade Balance (Dec)

The Majors

It was bearish end to the week, with a run of 3 consecutive days in the green coming to an end on Friday.

The DAX30 led the way down, falling by 0.45% with the CAC40 and EuroStoxx600 declining by 0.14% and by 0.27% respectively.

Economic data from the U.S failed to give the European majors support at the end of the week.

Negative sentiment towards the anticipated impact of the coronavirus on the Chinese economy weighed on the day.

Economic data from the Eurozone added to the negative sentiment, with stats out of Germany questioning the ECB’s view on the economy.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Friday. Key stats included German industrial production and trade figures for December.

Minor stats on the day also garnered interest, with French industrial production figures also weighing on appetite for European stocks.

According to Destatis, industrial production tumbled by 3.5% in December, reversing a 1.2% rise from November with interest.

  • Production in industry excluding energy and construction fell by 2.9%.
  • Within industry, the production of capital goods decreased by 3.5% and the production of consumer goods by 2.0%. The production of intermediate goods was also on the slide, falling by 2.6%.
  • Outside industry, energy production rose by 2.05, while production in construction slid by 8.7%.
  • Industrial production slumped by 6.8% on the same month a year earlier.

Germany’s trade surplus widened from €18.5bn to €19.2bn in December. Economists had forecast a narrowing to €18.4bn.

According to Destatis,

  • Exports increased by 0.1%, month-on-month, while imports fell by 0.7%.
  • Over the same month a year earlier, exports increased by 2.3%, while imports rose by 1.2%.
  • Compared with the previous year, exports increased by 0.8%, while imports rose by 1.4% in 2019.

Looking at 2019,

  • Germany exported goods to the value of €777.3bn to EU member states and imported goods to the value of €631.3bn.
  • Compared with 2018, exports to EU countries fell by 0.2%, while imports from EU countries increased by 1.3%.
  • Exports of goods to countries outside of the EU increased by 2.2%, while imports increased by 1.6% when compared with 2018.

Late in the day, impressive nonfarm payroll figures failed to reverse losses from earlier in the day. U.S nonfarm payrolls increased by 225k in January, with wages rising by 3.1% year-on-year. While the numbers were impressive, the U.S unemployment rate rose from 3.5% to 3.6% as a result of a jump in the participation rate.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector. Daimler and Volkswagen led the way down, sliding by 2.69% and by 2.63% respectively. BMW and Continental saw more modest losses of 2.31% and 1.52% respectively.

It was also a bullish day for the banks, however. Commerzbank gained 1.86%, while Deutsche Bank rose by 0.46%.

Deutsche Lufthansa hit reverse with a 2.66% slide, with Infineon Technologies falling by 1.85%.

From the CAC, it was a mixed day for the banks. BNP Paribas rallied by 2.82%, with Credit Agricole rising by 0.94%. Soc Gen bucked the trend on the day, falling by 0.16%.

It was also a bearish day for the French auto sector. Peugeot and Renault fell by 2.41% and by 2.87% respectively.

Air France-KLM joined Lufthansa in the deep red, sliding by 3.34%.

On the VIX Index

A 4-day losing streak came to an end on Friday. Reversing a 1.25% fall from Thursday, the VIX rose by 3.41% to end the day at 15.5.

Jitters over the spread of the coronavirus resurfaced on Friday, leaving the U.S equity markets in the red on the day.

Impressive labor market stats out of the U.S failed to shift sentiment as the news wires delivered dire 1st quarter economic growth forecasts for China.

Standard & Poor’s led the way on the doom and gloom, projected just 5% growth for 2020. There were more bearish forecasts in the mix, with 0% growth for the 1st quarter doing risk appetite few favors.

The Day Ahead

It’s a particularly quiet day on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

With no material stats form the U.S to influence later in the day, updates on the coronavirus and geopolitics will likely drive the majors on the day.

We saw last week that the U.S put trade talks with the EU on ice, which suggests more muscle-flexing to come before any agreement.

Expect any further threats of tariffs to test the European majors, particularly when considering a possible fall in demand for EU goods from China…

In the futures markets, at the time of writing, the DAX was down by 25.5 points, with the Dow down by 7 points.

This article was originally posted on FX Empire

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