European Equities: Trump, Economic Data, COVID-19, and U.S Politics in Focus

The Majors

It was a bullish start to the week for the European majors on Monday, with the DAX30 rising by 1.10% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 0.97% and 0.81% respectively.

Positive updates on U.S President Trump’s health delivered support to the majors on the day. Adding to the upside on the day was positive progress towards a COVID-19 relief Bill on Capitol Hill.

The Stats

It was a busy start to the week on the Eurozone economic calendar.

Key stats included September’s service PMIs for Italy and Spain and August retail sales figures for the Eurozone.

Finalized service and composite PMIs for France, Germany, and the Eurozone were also in focus.

The PMIs

In September, Spain’s Services PMI fell from 47.7 to 42.4. Economists had forecast a decline to 46.3.

Italy’s Services PMI increased from 47.1 to 48.8, which was better than a forecasted 46.6.

The finalized French PMI came in at 47.5, which was in line with prelim, while Germany’s came in at 50.6. This was up from a prelim 49.1. In August, the PMIs had stood at 51.5 and 52.5 respectively.

For the Eurozone, the September services PMI came in at 48.0, which was up from a prelim 47.6, while down from an August 50.5.

The Eurozone’s composite PMI came in at 50.4, which was up from a prelim 50.1. In August, the PMI had stood at 51.9.

According to the Eurozone’s September Composite Markit Survey,

• While the German manufacturing sector activity impressed in September, the rest of the Eurozone struggled.
• Private sector activity across the Eurozone was at its worst performance since May.
• While Germany’s composite PMI hit a 2-month high, only Italy reported an expansion of private sector activity alongside Germany.
• The rest contracted. France and Ireland hit 4-month and 3-month lows respectively.
• Spain’s composite came in at a 4-month low 44.3 to leave it at the bottom of the table.
• Incoming new business increased only slightly in September and at the slowest pace in the current 3-month period of growth.
• The only good news was that export trade rose for the 1st time in over 2-years.
• As a result of softer business growth, backlogs of work declined for a 19th consecutive month.
• Employment numbers fell for a 7th consecutive month, albeit at a modest pace.
• Business expectations picked up to the highest level in 7-months. Italian companies were the most confident.

Retail Sales

In August, retail sales jumped by 4.4%, reversing a 1.8% decline from July. Economists had forecast a 2.4% rise.

According to Eurostat,

• Non-food product sales increased by 6.1%, with food, drinks, and tobacco sales rising by 2.4%. Automotive fuel sales rose by 2.1%.
• By member state, Belgium (+9.6%), France (+6.2%), and Germany (+3.1%) reported the largest increases in total retail trade volume.
• Slovenia (-1.6%) and Portugal (-1.4%) registered the largest declines.
• In August 2020 compared with August 2019, retail sales increased by 3.7%.

From the U.S

It was a relatively busy day on the economic calendar. Key stats included the market’s preferred ISM Non-Manufacturing PMI.

In September, the ISM Non-Manufacturing PMI rose from 56.9 to 57.8. Economists had forecast a fall to 56.3.

The finalized Market survey services PMI came in at 54.6, which was in line with prelim figures. In August, the PMI had stood at 55.0.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. BMW jumped by 3.47% to lead the way, with Daimler rising by 2.68%. Continental and Volkswagen weren’t far behind, with gains of 2.14% and 2.59% respectively.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank rose by 1.14% and by 1.98% respectively.

From the CAC, bank stocks found much-needed support. Credit Agricole rose by 1.82%, with BNP Paribas and Soc Gen ending the day up by 3.16% and by 3.17% respectively.

It was a bullish day for the French auto sector. Peugeot and Renault rose by 2.23% and by 2.78% respectively.

Air France-KLM rallied by 4.35%, with Airbus SE ending the day with a 1.83% gain.

On the VIX Index

It was a 5th consecutive day in the green for the VIX on Monday. Following a 3.48 gain from Friday, the VIX rose by 1.19% to end the day at 27.96.

While the risk appetite returned over the latest updates on Trump’s health, the upward trend in the VIX points to volatility ahead.

The upside came in spite of the U.S equity markets making gains on the day. Uncertainty over the U.S Presidential Election outcome contributed to the upside in the VIX.

The Dow and S&P500 rose by 1.68% and by 1.80% respectively, while the NASDAQ rallied by 2.32% to reverse Friday’s losses.

The Day Ahead

It’s a relatively quiet day on the Eurozone economic calendar.

Key stats include Germany’s factory orders for August and September’s construction PMI.

Expect the factory orders to be the key driver on the day.

On the monetary policy front, ECB President Lagarde is also scheduled to speak. Expect any forward guidance or views on the economic outlook to influence.

From the U.S, economic data includes August trade and JOLTs job openings.

With recent labor market numbers raising questions over the labor market recovery, expect some sensitivity to the JOLTs numbers.

Also in focus late in the European session will be Fed Chair Powell who is scheduled to speak. There shouldn’t be too many surprises, however.

Away from the economic calendar, Brexit chatter, updates on Trump, and the COVID-19 relief Bill are also in focus.

Fresh spikes in COVID-19 cases and reintroduction of containment measures will also influence, however.

The Futures

In the futures markets, at the time of writing, the Dow was up by 65 points, with the DAX up by 26 points. #Eurozone##StockMarket#

Reprinted from Fxempire，the copyright all reserved by the original author.