European Equities: China PMIs, COVID-19, and Geopolitics in Focus

Economic Calendar:

Monday, 31st August

Spanish HICP (YoY) (Aug) Prelim

Italian CPI (MoM) (Aug) Prelim

German CPI (MoM) (Aug) Prelim

Tuesday, 1st September

Spanish Manufacturing PMI (Aug)

Italian Manufacturing PMI (Aug)

French Manufacturing PMI (Aug) Final

German Manufacturing PMI (Aug) Final

German Unemployment Change (Aug)

German Unemployment Rate (Aug)

Eurozone Manufacturing PMI (Aug) Final

Eurozone Core CPI (YoY) (Aug) Prelim

Eurozone CPI m/m (Aug) Prelim

Eurozone CPI y/y (Aug) Prelim

Eurozone Unemployment Rate (Jul)

Wednesday, 2nd September

German Retail Sales (MoM) (Jul)

Spanish Unemployment Change

Thursday, 3rd September

Spanish Services PMI (Aug)

Italian Services PMI (Aug)

French Services PMI (Aug) Final

German Services PMI (Aug) Final

Eurozone Markit Composite PMI (Aug) Final

Eurozone Services PMI (Aug) Final

Eurozone Retail Sales (MoM) (Jul)

Friday, 4th September

German Factory Orders (MoM) (Jul)

German IHS Markit Construction PMI (Aug)

The Majors

It was a bearish end to the week for the European majors on Friday, delivering a 2nd consecutive day in the red. The EuroStoxx600 fell by 0.52%, with DAX30 and CAC40 declining by 0.48 and by 0.26% respectively.

Reports of rising new COVID-19 cases across the EU weighed on the European majors on Friday. The impact of the fresh spike in new cases has been limited, however. News of progress towards a COVID-19 vaccine has limited the damage thus far.

With uncertainty over the economic outlook lingering, economic data also weighed on the majors on the day.

The Stats

It was a busy day on the Eurozone economic calendar. Key stats included German consumer sentiment and French consumer spending and 2nd quarter GDP numbers.

Prelim August inflation figures for France were also in focus on the day.

From Germany, the GfK Consumer Climate Index fell from -0.20 to -1.80 for September. According to the latest survey,

  • Income expectations saw a sharp decline, with the propensity to save on the rise suggesting a gloomy outlook on consumption.
  • The income expectations indicator slid by 5.8 points to 12.8, leaving it down by 37 points from the previous year.
  • The propensity to save indicator gained 5.5 points.
  • Economic expectations and the propensity to buy did see marginal increases, however.
  • The recent rise in new COVID-19 cases and the fear of a tightening of restrictions delivered uncertainty over what lies ahead.

From France, the economy contracted by 13.8% in the 2nd quarter, which was in line with prelim figures. Inflation figures also disappointed, with consumer prices falling by 0.1% in August.

In July, consumer spending rose by 0.5%, following a 10.3% jump in June. While continuing to rise, spending fell well short of a forecasted 2.0% rise.

From the U.S

It was a busy day on the economic calendar. Key stats included July inflation, trade, and personal spending figures. August PMI and consumer sentiment figures were also in focus.

Inflationary pressures picked up in July, with the Core PCE Price Index rising by 1.3% year-on-year. In June, the index had risen by 1.1%. Personal spending rose by 1.9%, following a 6.2% jump in June.

In contrast to the upbeat July numbers, August figures were mixed.

While the Chicago PMI fell from 51.9 to 51.2, the finalized Michigan Consumer Sentiment index was revised up from 72.8 to 74.1. In July, the index had stood at 72.5.

The stats had a limited impact on the European majors, however, which saw red whilst the NASDAQ and S&P500 hit new highs.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Friday. BMW, Continental, and Volkswagen rose by 0.07%, by 0.66%, and by 0.40% respectively. Daimler slipped by 0.01% on the day.

It was a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 0.81% and 2.73% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rallied by 3.60% and by 3.25% respectively, with Soc Gen ending the day up by 3.09%.

It was another bearish day for the French auto sector, however. Peugeot and Renault fell by 0.27% and by 0.52% respectively.

Air France-KLM rose by 0.56%, following on from Thursday’s 2.41% gain, while Airbus SE fell by 0.93%.

On the VIX Index

It was back into the red for the VIX on Friday, ending a run of 2 consecutive days in the green. Reversing a 5.16% gain from Thursday, the VIX fell by 6.17% to end the day at 22.96.

The S&P500 and Dow rose by 0.67% and by 0.57% respectively, with the NASDAQ ended the day up by 0.60%.

VIX 30/08/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include August prelim inflation figures for Germany, Italy, and for Spain.

We would expect the stats to have a muted impact on the majors, however.

From the early part of the day, NBS private sector PMI numbers for China will set the tone ahead of the European open.

With no material stats from the U.S to influence, COVID-19 news and geopolitics will also need monitoring on the day.

The Futures

In the futures markets, at the time of writing, the Dow was up by 84 points.

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