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European Equities: Trade Optimism Supports ahead of October PMI Numbers

Bob Mason

Economic Calendar:

Monday, 4th November

  • Spanish Manufacturing PMI (Oct)
  • Italian Manufacturing PMI (Oct)
  • French Manufacturing PMI (Oct) Final
  • German Manufacturing PMI (Oct) Final
  • Eurozone Manufacturing PMI (Oct) Final

Wednesday, 6th November

  • German Factory Orders (MoM) (Sep)
  • Spanish Services PMI (Oct)
  • Italian Services PMI (Oct)
  • French Services PMI (Oct) Final
  • German Services PMI (Oct) Final
  • Eurozone Markit Composite PMI (Oct) Final
  • Eurozone Services PMI (Oct) Final
  • Eurozone Retail Sales (MoM) (Sep)

Thursday, 7th November

  • German Industrial Production (MoM) (Sep)
  • ECB Economic Bulletin  

Friday, 8th November

  • German Trade Balance (Sep)
  • French Non-Farm Payrolls (QoQ) (Q3)

The Majors

It was a bullish end to the week for the European majors, with the DAX30 rising by 0.73% to lead the way on the day. The EuroStoxx600 and CAC30 weren’t far behind, with gains of 0.68% and 0.56% respectively.

Gains on the day came in spite of negative chatter on trade, with economic data out of China and the U.S providing support.

On the geopolitical front, news late in the week of China and the U.S having doubts over a longer-term trade agreement had tested risk sentiment going into Friday’s session.

The Stats

It was a quiet day on the Eurozone economic calendar on Friday. There were no material stats out of the Eurozone to provide the majors with direction.

The lack of stats left the majors in the hands of economic data from China and the U.S.

Ahead of the European open, China’s Caixin Manufacturing PMI rose from 51.4 to 51.7 in October, supporting risk appetite. Economists had forecast a fall to 51.0.

Later in the day, economic data out of the U.S also delivered support to the European majors.

Nonfarm payrolls increased by 129k in October, coming in well above a forecast of 89k. While average earnings rose by just 0.2%, month-on-month, short of a forecasted 0.3% rise, year-on-year average earnings rose by 3%.

The numbers were good enough to support risk, offsetting the negative stats on the day, which included disappointing manufacturing PMIs and a rise in the U.S unemployment rate.

While the Manufacturing PMI rose from 47.8 to 48.3, economists had forecasted rise to 48.9. On the unemployment front, a rise from 3.5% to 3.6% was expected, which limited any negative reaction to the rise.

The Market Movers

For the DAX: It was a bullish day for the auto sector, as the markets brushed off the negative sentiment towards trade. Continental led the way, rallying by 2.24%. BMW and Volkswagen also made solid gains, rising by 1.02% and by 0.85% respectively. Daimler trailed the pack with a more modest 0.5% gain on the day.

Banks found strong support at the end of the week. Commerzbank rose by 1.49%, with Deutsche Bank rising by 1.93%.

From the CAC, bank stocks also found support. Soc Gen and BNP Paribas led the way, rising by 1.61 % and by 0.77% respectively, with Credit Agricole up by 0.73%.

It was also bullish for the autos. Peugeot rallied by 2.91%, with Renault rising by 2,11% on the day.

On the VIX Index

The VIX Index hit red at the end of the week, falling by 6.96%. Reversing a 7.22% rise from Thursday, the VIX ended the day at 12.3

Economic data out of China and the U.S left the VIX in the red on the day, as the markets looked beyond the U.S – China trade war.

Negative sentiment towards trade had provided the VIX with the prospect of a weekly rise on Thursday.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. October Manufacturing PMIs are due out of Spain and Italy, ahead of finalized numbers for France, Germany, and the Eurozone.

Barring any deviation from prelims, Italy and the Eurozone’s finalized PMIs will likely have the greatest influence on the majors.

Expect the DAX30 to be more sensitive to any revised figures out of Germany, however.

From the U.S, September factory orders will also provide direction later in the day.

On the geopolitical front, chatter on trade and political news from the UK will also have influence. Positive comments from the U.S administration over the weekend supported risk appetite early in the day.

In the futures market, at the time of writing, the DAX30 was up by 33.5 points, with the Dow up by 34 points.

This article was originally posted on FX Empire