European Equities: Capitol Hill, COVID-19, and Brexit Remain Key Areas of Focus

Bob Mason
·4 min read

Economic Calendar:

Tuesday, 20th October

German PPI (MoM) (Sep)

Thursday, 22nd October

GfK German Consumer Climate (Nov)

Eurozone Consumer Confidence Flash

Friday, 23rd October

French Manufacturing PMI (Oct) Prelim

French Services PMI (Oct) Prelim

German Manufacturing PMI (Oct) Prelim

German Services PMI (Oct) Prelim

Eurozone Manufacturing PMI (Oct) Prelim

Eurozone Markit Composite PMI (Oct) Prelim

Eurozone Services PMI (Oct) Prelim

The Majors

It was a bearish start to the week for the European majors on Monday. The DAX30 fell by 0.42%, with the CAC40 and EuroStoxx600 seeing losses of 0.13% and 0.18% respectively.

A lack of economic data from the Eurozone left Brexit, COVID-19, and updates from Capitol Hill in focus on the day.

While hopes of a COVID-19 Stimulus package had provided early support, concerns over COVID-19 and Brexit weighed.

A reintroduction of lockdown measures in Europe raised concerns over the economic outlook, as did Brexit.

Following the British PM’s decision to end negotiations, the EU had yet to deliver a meaningful compromise in response to Johnson’s announcement. Downing Street had left the door ajar for further talks but not if the EU’s stance remained unchanged.

The Stats

It was a particularly quiet day on the Eurozone economic calendar. There were no material stats from the Eurozone to provide the majors with direction on Monday.

Ahead of the European open, economic data from China had provided the European majors some support going into the open.

The stats from China reflected the continued economic recovery from the COVID-19 shutdown, though GDP numbers fell short of forecasts.

From the U.S

It was also a particularly quiet day on the economic calendar, with no stats from the U.S to influence.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Continental bucked the trend, rising by 0.48%, while Daimler slid by 2.32% to lead the way down. BMW and Volkswagen saw modest losses of 0.03% and 0.06% respectively.

It was a bullish day for the banks, however. Deutsche Bank rose by 0.38%, with Commerzbank rallying by 1.99%

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.23% and by 0.60% respectively. Soc Gen led the way once more, however, with a 1.96% gain.

It was a mixed day for the French auto sector, with Peugeot rising by 0.16%, while Renault slipped by 0.25%.

Air France-KLM rallied by 7.36%, with Airbus SE gaining by 2.14%.

On the VIX Index

It was a 6th consecutive day in the green for the VIX. Following a 1.63% gain on Friday, the VIX rose by 6.46% on Monday to end the day at 29.18.

Hopes of a stimulus deal, following chatter from the weekend, faded on the day, sending the U.S majors into the red.

The Dow and S&P500 fell by 1.44% and by 1.65% respectively, with the NASDAQ ending the day down by 1.65%.

The Day Ahead

It’s a relatively quiet day on the Eurozone economic calendar. German wholesale inflation figures for September are due out going into the European open.

The numbers are unlikely to influence, however, with COVID-19, geopolitics, and PBoC monetary policy in focus.

From the U.S, economic data is limited to housing sector figures for September. We would expect the markets to brush aside the numbers, with all eyes on Capitol Hill.

Democrat Nancy Pelosi had set a Tuesday deadline to reach a stimulus agreement before the Presidential Election. Negative sentiment towards the chances of a stimulus package weighed on the U.S majors on Monday. We can expect the European majors to come under pressure early on.

Ahead of the European, the PBoC is in action. The markets are expecting the PBoC to leave loan prime rates unchanged. Economic data from Monday supported a hold on monetary policy.

The Futures

In the futures markets, at the time of writing, the Dow was up by 158 points, while the DAX was down by 33.5 points.

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

This article was originally posted on FX Empire