Thursday, 7th November
- German Industrial Production (MoM) (Sep)
- ECB Economic Bulletin
Friday, 8th November
- German Trade Balance (Sep)
- French Non-Farm Payrolls (QoQ) (Q3)
It was a 4th consecutive day in the green for the European majors on Wednesday, with the CAC40 rising by 0.34% to lead the way. The EuroStoxx600 and DAX30 weren’t far behind, with gains of 0.21% and 0.24% respectively.
In a choppy session that saw the majors in the red early in the day, economic data from the Eurozone provided much-needed support.
On the geopolitical front, news of China pushing for the U.S Administration to remove September tariffs as part of the Phase 1 deal raised concerns over whether a Phase 1 agreement would materialize.
Earnings were also in focus on the day, with a number of European heavyweights delivering results.
It was a busy day on the Eurozone economic calendar on Wednesday. Key stats from the Eurozone included German factory orders, Spanish and Italian service PMIs and the Eurozone’s September retail sales figures.
France, Germany, and the Eurozone’s finalized service sector and composite PMI were also of influence.
From Germany, factory orders rose by 1.3% in September, reversing a 0.6% fall in August. Economists had forecast a 0.1% rise.
According to Destatis,
- Domestic orders increased by 1.6%, with foreign orders rising by 1.1%, month-on-month.
- New orders from the Eurozone slid by 1.8%, while new orders from other countries jumped by 3.0%.
- Manufacturers of intermediate goods saw new orders decrease by 1.5%, while manufacturers of capital goods saw new orders rise by 3.1%.
- New orders for consumer goods increased by 0.8%, month-on-month.
- While new orders rose by 1.3% in September, month-on-month, new orders were down by 5.4% on the same month a year earlier.
The PMI numbers
Spain’s service PMI fell from 53.3 to 52.7 in October. Economists had forecast a fall to 52.8.
Italy’s service PMI rose from 51.4 to 52.2 in October, coming in ahead of a forecasted decline to 51.0.
France’s finalized service PMI came in at 52.9, in line with prelim and up from a September 51.1
Germany’s finalized service PMI stood at 51.6, up from a prelim 51.2 and September 51.4.
With the Eurozone service PMI rising from 51.6 to 52.2, (Prelim: 51.8), the composite index came in at 50.6. This was up from a prelim 50.2 and September 50.1.
According to the Eurozone’s Composite PMI Survey,
- While the composite was up in October, the PMI continued to signal a rate of growth that was amongst the weakest seen in the past six-and-a-half years.
- The divergence between the manufacturing and service sectors remained in October.
- While manufacturing firms recorded a 9th consecutive month of decline in production, service sector activity picked up in the month.
- In October, Germany was the only member state to see the private sector contract.
- Italy, Ireland, and Spain recorded marginal private-sector output when compared with September.
- With Ireland, growth was the softest in the current 89-month sequence, while Spain registered the weakest rise in activity for nearly 6-years.
- France outperformed in October, with the manufacturing sector returning to expansion and service sector activity picking up.
For the Eurozone
- New work declined for a 2nd consecutive month in October, with the manufacturing sector recording another sizeable fall in new orders. There was also a sharp decline in foreign demand.
- Overall, exports fell for a 13th successive month, with the decline amongst the sharpest in the series history.
- Backlogs declined for an 8th consecutive month as new work declined further.
- Employment increased, though the rate of increase was the weakest in over 4-years.
- Input prices rose but remained close to September’s 37-month low.
- Output prices rose at a subdued pace, as the economic environment pressured pricing power.
- Business optimism also remained subdued as political and economic uncertainties weighed on sentiment.
Later in the day, retail sales rose by 0.1% in September, following a revised 0.6% rise in August. Economists had forecast a 0.1% rise.
According to Eurostat,
- Month-on-month, automotive fuel sales rose by 0.4%, with non-food product sales rising by 0.1%.
- Pinning back total retail sales, however, was a 0.4% fall in the sale of food, drinks, and tobacco.
- Ireland reported the largest increase in sales, with a 2.4% rise. Portugal (-2.4%), Latvia (-1.0%) and Slovenia (-0.7%) reported the largest declines in sales.
- Year-on-year, retail sales rose 3.1%. Sales of non-food products rose by 4.6%. Sales of automotive fuel and sales of food, drinks, and tobacco rose by 1.6% and by 1.3% respectively.
- Ireland recorded the highest increase in sales, up by 5.2%. Slovakia (-2.7%) and Latvia (-0.4%) saw the largest declines in sales.
The stats provided much-needed support through the early part of the session, with the DAX30 recovering from early losses.
The Market Movers
For the DAX: It was a mixed day for the auto sector, as the markets responded to earnings results and trade news. Volkswagen found strong support, rising by 1.05% to lead the way. BMW and Continental also ended the day in positive territory with gains of 0.66% and 0.19% respectively. Daimler bucked the trend, falling by 0.78%.
Banks were mixed on the day. Commerzbank rose by 0.05%, while Deutsche Bank slipped by 0.16%.
Adidas and BMW delivered earnings results on the day. While Adidas failed to impress, leading to a 4.33% slide, BMW reported a 33% increase in 3rd quarter operating profit, supporting upside on the day. A weak forecast for full-year pre-tax profit limited gains, however.
From the CAC, bank stocks also found support. Soc Gen and BNP Paribas led the way, rising by 3.41% and by 1.57% respectively, with Credit Agricole up by 0.79%.
It was bearish for the autos, however. Peugeot and Renault fell by 1.68% and by 1.59% respectively.
Soc gen delivered earnings results that were slightly below expectations. The bank’s solid ratios, however, delivered upside on the day, with the bank in a strong position to weather economic storms.
On the VIX Index
The VIX Index resumed its downward trend on Wednesday, falling by 3.66%. Reversing a 2.10% rise from Tuesday, the VIX ended the day at 12.6
A choppy session for the U.S majors saw the Dow and S&P500 see red before a late recovery. Concerns over Phase 1 of a U.S – China agreement tested the majors through the session.
The late recovery led to a late VIX slide into the red.
The Day Ahead
It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include German industrial production figures for September.
From the ECB, the Economic Bulletin is also due out later in the day.
On the geopolitical risk front, we can expect any chatter on trade and UK politics to also provide direction throughout the day.
Corporate earnings will also be in focus on the day, with Commerzbank due to release quarterly earnings today.
In the futures market, at the time of writing, the DAX30 was up by 7 points, while the Dow down by 3 points.
This article was originally posted on FX Empire
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