Thursday, 25th July
- German IFO Business Expectations, Current Assessment, and Climate Indexes
- French Jobseekers Total
- ECB Monetary Policy Statement (Jul)
- ECB Press Conference
The European majors ended the day mixed on Wednesday. The DAX and EuroStoxx600 ended the day in the green, with gains of 0.26% and 0.05%, while the CAC40 fell by 0.22%.
Gains for the DAX and EuroStoxx600 came in spite of weak economic data released on the day. Corporate earnings out of Germany also failed to impress, with Deutsche Bank releasing a worse than forecast set of numbers.
Monetary policy ruled the day as the markets continued to price in further easing by the ECB later today and by the FED next week.
Key stats out of the Eurozone on Wednesday included July prelim private sector PMI numbers for France, Germany, and the Eurozone.
According to the latest Markit Surveys, Germany’s manufacturing PMI fell from 45.0 to 43.1, the lowest level in 84-months. According to the latest composite survey,
- Manufacturing output saw one of its most marked contractions since 2009. New orders, employment and stocks of purchases slid at a faster pace.
- Manufacturing sector employment saw the most marked fall in payrolls in 7-years.
- Factory export orders saw the sharpest fall in over 10-years, attributed to weaker demand from China and for autos.
- Confidence amongst manufacturers towards future output sank to its lowest level since late 2012.
- The service sector PMI fell from 55.8 to 55.4, with services companies seeing their weakest optimist since Dec-14.
Things were not much better for France. The manufacturing sector stalled in July, with the PMI falling from 51.9 to 50.0. The service sector PMI also disappointed, falling from 52.9 to 52.2, according to prelim figures.
For the Eurozone, the July composite PMI came in at 51.5, down from 52.2. The manufacturing PMI slid from 47.6 to 46.4, with the services sector PMI falling from 53.6 to 53.3.
According to the latest Eurozone Composite PMI,
- The Eurozone’s manufacturing PMI Output Index fell from 47.5 to 47.0, a 75-month low, with the manufacturing PMI sitting at a 79-month low.
- Overall inflows of new work almost stagnated and business sentiment fell to its lowest level since late 2014.
- The manufacturing sector reported the largest drop in productivity since April 2013. Manufacturers also reported the 2nd largest drop in new orders since 2012. Goods exports fell at the steepest rate since November 2011.
From the U.S, the July Composite PMI increased from 51.5 to 51.6. The upside came off the back of a pickup in service sector activity that more than offset stagnation in the manufacturing sector. According to the latest Markit PMI survey,
- The U.S Composite Output Index rose from 51.5 to a 3-month high 51.6, supported by an increase in the services business activity index. The index rose from 51.5 to a 3-month high 52.2.
- In the manufacturing sector, the PMI fell from 50.6 to a 118-month low 50.0. The Manufacturing Output Index fell from 51.2 to a 119-month low 48.9.
The Market Movers
From the DAX, the auto sector was amongst the best performers on the day. Volkswagen led the way with a 0.83% gain, closely followed by Continental, which rose by 0.46%. BMW and Daimler also saw green, rising by 0.37% and 0.33% respectively.
Disappointing earnings results weighed on Deutsche Bank, which fell by 0.62% on the day. Commerzbank managed a 0.39% rise.
From the CAC, BNP Paribas eked out a 0.01% gain, while Soc Gen and Credit Agricole rose by 0.59% and by 0.18% respectively. Renault also found support on the day, rising by 1.1% on Friday.
The Day Ahead
It’s a relatively busy day on the economic calendar. July IFO Business Climate Index numbers are due out of Germany early on. In the early afternoon, France’s jobseeker figures are also due out, though will unlikely have a material impact.
Germany’s IFO numbers will provide the majors with direction ahead of the ECB monetary policy decision and press conference.
The markets will be looking for further easing ahead of the ECB press conference. It may ultimately boil down to Draghi on the day. A cut in rates and assurances of further action if needed would be a positive for the majors.
There will also be corporate earnings to consider on the day, with earnings from both Germany and the U.S in the spotlight.
At the time of writing, the DAX was up by 57.5 points, while the Dow Mini was up by 51 points.