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European Equities: Consumer Confidence and Geopolitics in Focus

Bob Mason

Economic Calendar:

Tuesday, 26th November 2019

  • GfK German Consumer Climate (Dec)

Wednesday, 27th November 2019

  • France Jobseekers Total

Thursday, 28th November 2019

  • Spanish CPI (YoY) (Nov) Prelim
  • Spanish HICP (YoY) (Nov) Prelim
  • German CPI (MoM) (Nov) Prelim

Friday, 29th November 2019

  • German Retail Sales m/m (Oct)
  • French Consumer Spending (MoM) (Oct)
  • French CPI m/m (Oct) Prelim
  • French HICP m/m (Oct) Prelim
  • French GDP (QoQ) (Q3)
  • German Unemployment Change (Nov)
  • German Unemployment Rate (Nov)
  • Italian CPI (MoM) (Nov) Prelim
  • Eurozone CPI (YoY) (Nov) Prelim
  • Eurozone Unemployment Rate (Oct)

The Majors

European majors found further support on Monday, with the EuroStoxx600 rising by 1.02% to lead the way. The CAC40 and DAX30 were close behind with gains of 0.63% and 0.54% respectively.

Upside on the day came off the back of news from Beijing that it would clamp down on intellectual property breaches.

The announcement likely resulted from ongoing trade talks between the U.S and China, with IP theft a major issue for the U.S President.

Beijing announced more stringent rules and more severe penalties ahead of the market open on Monday.

On Friday, Trump announced that the U.S and China were getting close to a phase 1 trade agreement, suggesting that tensions had eased.

The latest move by Beijing largely affirmed the more optimistic sentiment from Friday.

Interestingly, there were no further updates on whether Trump would veto or sign the HK Bills…

The Stats

It was a relatively busy day on the Eurozone economic calendar on Monday. Key stats included November business sentiment figures out of Germany.

The IFO Business Climate Index rose from 94.7 to 95.0 in November, which was in line with forecasts.

According to the November IFO report,

  • Companies’ assessment of the current situation also improved marginally, rising from 97.8 to 97.9.
  • Also positive were less pessimistic views on the business outlook, with the Business Expectations index rising from 91.5 to 92.1.
  • While the headline figures were positive, the manufacturing sector sub-indexes continued to paint a bleak picture.

From the U.S, there were no material stats to provide direction later in the day.

The Market Movers

For the DAX: It was a bullish day for the auto sector, as the markets responded to updates on trade. Daimler led the way on the DAX30, rallying by 1.65%, with Continental and BMW rising by 1.43% and 0.35% respectively. Volkswagen managed to reverse losses late on, with a 0.23% gain on the day.

It was also a positive day for the banks. Deutsche Bank gained 0.10%, with Commerzbank rising by 0.95%.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 0.16% to lead the day down. Credit Agricole and Soc Gen saw more modest losses of 0.12% and 0.10% respectively.

In spite of positive sentiment towards updates on trade, French Autos struggled at the start of the week. Peugeot fell by 0.67%, with Renault down by 0.76%.

On the VIX Index

The VIX fell for a 2nd consecutive day on Monday, declining by 3.81%. Following on from a 6.02% fall from Friday, the VIX ended the day at 11.9.

Pressure on the VIX continued as sentiment towards the prospects of a phase 1 trade agreement improved.

News from the U.S on Friday and reports from China from over the weekend, of the government’s plans to clamp down on intellectual property theft, supported the major indexes.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone are limited to December consumer confidence figures out of Germany.

We can expect the GfK Consumer Climate Index to provide direction going into the European open.

The ECB continues to rely on service sector activity and consumer spending to offset the effects of a contraction in the manufacturing sector.

From the U.S, CB Consumer Confidence figures for November will also provide direction late in the session.

Outside of the numbers, however, expect updates from Beijing and Washington on trade to continue to have a greater influence on the day.

While updates from trade talks have been positive, the markets may now need a signing date and location…

In the futures market, at the time of writing, the DAX30 was up by 30 points, with the Dow up by 70 points.

This article was originally posted on FX Empire

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