European Equities: Private Sector PMI Numbers to Drive the Majors
Economic Calendar:
Friday, 22nd March 2019
French Manufacturing PMI (Mar) Prelim
French Services PMI (Mar) Prelim
German Manufacturing PMI (Mar) Prelim
German Services PMI (Mar) Prelim
Eurozone Manufacturing PMI (Mar) Prelim
Eurozone Markit Composite PMI (Mar) Prelim
Eurozone Services PMI (Mar) Prelim
The Majors
It was another day in the red for the European majors. The DAX continued to lead the way, falling by 0.46%. The EuroStoxx600 and CAC40 saw more moderate losses, the pair ending the day with 0.15% and 0.07% declines respectively.
The losses in the European majors came in spite of a pullback in the EUR through the day. The EUR slid by 0.34% against the Dollar on the day. Sentiment towards the Eurozone economy and sliding bond yields offset any support from a weaker EUR.
Sliding government bond yields continued to weigh heavily on the financial sector as the markets responded further to the latest FOMC economic projections.
Looking across the banking sector, Deutsche Bank (DBK) and Commerzbank tumbled by 3.01% and 3.36% respectively. France’s BNP Paribas and Italy’s UniCredit S.p.A didn’t do much better, sliding by 2.6% and 1.73% respectively.
It’s a double whammy for Europe’s banks. Slower growth has pinned back bank stocks from any major recovery. With the FED’s move to normalization now considered complete, any hopes of a shift in ECB monetary policy and pickup in bond yields have been dashed for now.
Following Wednesday’s sell-off in the Auto sector, there was no major rebound on Thursday. BMW continued to see red, down by 0.89%, with Volkswagen ending the day down 0.36%. Near-term direction for the sector remains in the hands of U.S – China trade talks, though the data will also need to be tracked.
The Day Ahead
Economic data out of both Europe and the U.S will provide direction through the day. Prelim private sector PMI numbers out of France and Germany will certainly have an impact on the EUR and the major indices.
The primary focus will be on Germany’s manufacturing PMI. With the sector now having been in contraction for 2-consecutive months, the markets will be looking for signs of a rebound. A pickup in new orders and new export orders would certainly provide some support through the day.
It’s not going to hang completely on the numbers out of Germany however. The Eurozone’s manufacturing PMI will also need to return to expansion in March to support the broader market.
Out of the U.S, a positive service sector PMI number later today could provide support to the financial sector and risk appetite in general. Positive numbers would give Treasury yields and European government bond yields a much-needed boost.
Outside of the stats, noise from the Oval Office will also need to be considered. A U.S delegate is scheduled to travel to Beijing for further trade talks next week. As has been the case in the past, the U.S President could deliver some rhetoric to further spook the markets going into the weekend.
At the time of writing, the DAX30 and CAC40 futures were in the red, tracking the U.S futures market. A slide in the Hang Seng and CSI300 will not be of much help for risk sentiment ahead of the European open.
This article was originally posted on FX Empire
