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European Equities: U.S Retail Sales, the FED, and Geopolitics in Focus

Bob Mason

Economic Calendar:

Wednesday, 16th September

Eurozone Trade Balance (Jul)

Thursday, 17th September

Eurozone Core CPI (YoY) (Aug) Final

Eurozone CPI (YoY) (Aug) Final

Eurozone CPI (MoM) (Aug)

Friday, 18th September

German PPI (MoM) (Aug)

The Majors

It was a relatively bullish day for the European majors on Tuesday, following a couple of mixed sessions.

A run of 3 consecutive days in the red came to an end for the DAX30, which eked out a 0.18% gain on Tuesday. The CAC40 and EuroStoxx600 ended the day up by 0.32% and 0.66% respectively.

Economic data from China set the mood. In August, industrial production, retail sales, and unemployment figures reassured the markets of China’s continued economic recovery.

Away from the economic calendar, the majors also took their cues from the U.S futures, which were on the move early in the day.

The Stats

It was a busy day on the Eurozone economic calendar. Key stats included Germany and Eurozone ZEW economic sentiment figures for September.

2nd quarter wage growth for the Eurozone and finalized August inflation figures for France and Italy were also in focus.

In September, Germany’s ZEW Economic Sentiment indicator rose from 71.5 to 77.4. Economists had forecast a decline to 69.8.

The Eurozone’s Economic Sentiment indicator rose from 64.0 to 73.9 in September.

From the Eurozone, wage growth figures also impressed in the 2nd quarter, despite the COVID-19 pandemic’s influences. Wages rose by 5.2%, following on from an upwardly revised 3.9% rise in the 1st quarter.

On the inflation front, finalized numbers for France and Italy were in line with prelim, thus having a muted impact on the majors.

From the U.S

NY Empire State Manufacturing Index numbers for September and August industrial production figures were in focus late in the session.

In September, the NY Empire State Manufacturing Index increased from 3.7 to 17.0. Economists had forecast an increase to 6.0.

Industrial production disappointed, however. In August, production rose by 0.4%, coming up short of a forecasted 0.9% rise. In July, production had risen by 3.0%.

The Market Movers

For the DAX: It was yet another mixed day for the auto sector on Tuesday. BMW rose by 0.56% to buck the trend on the day. Volkswagen and Daimler fell by 0.12% and by 0.30% respectively, while Continental slid by 1.78%.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank saw heavier losses of 2.12% and 2.38% respectively.

From the CAC, it was a bearish day for the banks, after Monday’s gains. BNP Paribas slid by 2.01% to lead the way down. Credit Agricole and Soc Gen saw more modest losses of 1.20% and 1.56% respectively.

It was a mixed day for the French auto sector, however. Peugeot rose by 2.16%, while Renault ended the day down by 2.55%.

Air France-KLM fell by a further 0.22%, following Monday’s 0.16% loss, while Airbus SE slid by 2.58%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Tuesday. Following on from a 3.8% fall on Monday, the VIX slipped by 1.01% to end the day at 25.59.

Another bullish day for the U.S equity markets left the VIX in the red once more. Tech shares delivered the upside on the day, with positive economic data from China and M&A activity delivering the upside on the day.

While tech stocks found support, it was the financial sector that weighed ahead of today’s FOMC…

The NASDAQ rose by 1.21%, with the Dow and S&P500 seeing gains of 0.01% and 0.52% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats include July trade data for the Eurozone.

Barring particularly dire numbers, however, the stats will likely have a muted impact on the majors.

The FOMC is in action after the European close, which will leave the majors in limbo. Following the revised monetary policy framework, the markets will be looking for a fresh set of economic and interest rate projections.

Based on plenty of dovish chatter, expectations are low for longer. Any deviation and expect the riskier assets to come under pressure. The European majors will lag the U.S majors and respond tomorrow.

From the U.S, August retail sales figures will influence ahead of the European close. A continued rise in retail sales is a must mid-way through the 3rd quarter.

Away from the economic calendar, Brexit and chatter from Beijing and Washington will also be in focus on the day.

The Futures

In the futures markets, at the time of writing, the Dow was up by 15 points.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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