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European Equities: Brexit, Economic Data, and the ECB Minutes in Focus

Economic Calendar:

Thursday, 24th November

GfK German Consumer Climate (Dec)

ECB Publishes Account of Monetary Policy Meeting  

Friday, 25th November

French Consumer Spending (MoM) (Oct)

French CPI (MoM) (Nov) Prelim

French GDP (QoQ) (Q3) Final

French HICP (MoM) (Nov) Prelim

Eurozone Consumer Confidence Final

The Majors

It was a mixed day for the European majors on Wednesday. The CAC40 rose by 0.23%, while the DAX30 and the EuroStoxx600 slipped by 0.02% and by 0.08% respectively.

A planned easing of containment measures provided support to the European majors on the day. While Germany will reportedly allow gatherings for Christmas, France will begin to ease lockdown measures this weekend. The more aggressive plans to ease containment measures in France delivered the upside for the CAC40.

From the U.S, a continued surge in new COVID-19 cases and disappointing economic data weighed on the day, however.

The Stats

It was a quiet day on the Eurozone economic calendar. French jobseeker figures were in focus in the early part of the session.

In October, the total number of jobseekers decreased from 3,606.3k to 3,549.7k. Coupled with progress towards a COVID-19 vaccine, the numbers supported the CAC40.

From the ECB, the Financial Stability Review also failed to move the dial.

Salient points from the review included:

  • The coronavirus pandemic, and its impact on macroeconomic prospects as well as sovereign, corporate, and household balance sheets, continue to dominate the outlook for euro area financial stability.
  • Near-term financial stability risks are contained by massive policy impact. A premature end to schemes could challenge corporates and households, however.
  • Medium-term vulnerabilities have increased with rising debt burdens. Euro area banks, which have shown resilience so far, face a combination of growth asset quality concerns, persistent structural problems, and ongoing pressures on profitability.
  • Macroprudential policy must continue to focus on leaning against undue deleveraging, supporting capital buffer usability, and developing an effective framework for the non-bank financial sector.
  • The euro area economy faces a fragile and uneven recovery, notwithstanding considerable policy support.
  • Downside risks that remain include an adverse outcome of Brexit negotiations. On the plus, the availability of a vaccine in the near future may help the euro area return to pre-pandemic levels of economic activity faster.

From the U.S

It was a particularly busy day on the economic data front. Key stats included the weekly jobless claims, core durable goods, 3rd quarter GDP, and personal spending figures.

In the 3rd quarter, the economy expanded by 33.1%, according to the 2nd estimate figures. This was in line with the 1st estimate while coming up short of a forecasted 33.2%.

Core durable goods orders rose by 1.3% in October, following a 1.5% increase in September. Economists had forecast a 0.5% rise.

Personal spending followed a 1.2% increase in September with a 0.5% rise in October. Economists had forecast a 0.4% rise.

On the employment front, initial jobless claims stood at 778k in the week ending 20th November. This was up from the week prior’s 742k and was another signal that the labor market recovery was stalling.

The FED

From the FED, the FOMC meeting minutes were released after the European close, which was focused heavily on the effects of the COVID-19 pandemic.

Salient points from the Committee Policy Action section included:

  • Economic activity and employment had continued to recover but remained well below their levels at the beginning of the year.
  • Weaker demand and earlier declines in oil prices had been holding down consumer price inflation.
  • The FED was committed to using its full range of tools to support the U.S economy in this challenging time.
  • Members stated that the path of the economy would significantly depend on the course of the virus.
  • Additionally, members agreed that the ongoing health crisis would continue to weigh on economic activity, employment, and inflation in the near-term. This was posing considerable risks to the economic outlook over the medium-term.
  • Members expected to maintain an accommodative stance on monetary policy until inflation moved moderately above 2% and maximum employment was achieved.
  • Over the coming months, it would be appropriate for the FED to increase its holdings of Treasury Securities and agency MBS.
  • The FED would continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance on monetary policy as appropriate.
  • Considerations would include readings on public health, labor market conditions, inflation pressures, and expectations, and financial and international developments.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Volkswagen slid by 2.43% to lead the way down, with BMW and Daimler seeing losses of 1.69% and 1.24% respectively. Continental ended the day down by a more modest 0.46%.

It was also a bearish day for the banks. Deutsche Bank fell by 1.06%, with Commerzbank sliding by 2.85%.

From the CAC, it was a relatively bullish day for the banks. Credit Agricole and Soc Gen rose by 0.53% and by 0.93% respectively. BNP Paribas eked out a 0.05% gain on the day.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 0.63% and 0.22% respectively.

Air France-KLM followed Tuesday’s 11.07% surge with a 2.1% gain, while Airbus SE slid by 2.14%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Wednesday. Following a 4.50% decline on Tuesday, the VIX fell by 1.80% to end the day at 21.25.

The downside for the VIX came in spite of the Dow and S&P500 seeing red on Wednesday. Disappointing economic data from the U.S left the pair in the red for the day.

On Wednesday, the Dow and S&P500 fell by 0.58% and by 0.16% respectively, while the NASDAQ rose by 0.48%.

VIX 261120 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German GfK Consumer Climate figures for December are due out later this morning.

With progress towards a COVID-19 vaccine, however, the DAX30 will likely be resilient to today’s numbers.

From the ECB, the ECB monetary policy meeting minutes will draw interest later in the day, however.

With the ECB assuring more support next month, the markets will be looking for some guidance on what to expect.

From the U.S, there are no material stats, with the U.S markets closed for Thanksgiving.

Away from the economic calendar, expect COVID-19 news updates and Brexit to also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 0.50 points.

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