European Equities: Economic Data and Corporate Earnings in Focus

Economic Calendar

Thursday, 5th August

German Factory Orders MoM JUN

German Construction PMI JUL

ECB Economic Bulletin

Friday, 6th August

German Industrial Production MoM JUN

The Majors

It was a bullish day for the European majors on Wednesday.

The DAX30 rose by 0.88%, with the CAC40 and the EuroStoxx600 ending the day up by 0.33% and by 0.61% respectively.

A busy economic calendar and corporate earnings provided direction for the majors on the day.

Ahead of the European open, impressive service sector PMI numbers from China and early gains across the Chinese equity markets had set the tone.

The Stats

Economic data was on the heavier side on Wednesday.

Service sector PMIs for Italy and Spain and retail sales figures for the Eurozone were in focus mid-week.

Finalized services and composite PMIs for France, Germany, and the Eurozone also drew interest.

Member States

In July, Spain’s services PMI decreased from 62.5 to 61.9, while Italy’s services PMI rose from 56.7 to 58.0. Economists had forecast PMIs of 62.9 and 58.0 respectively.

France’s services PMI fell from 57.8 to 56.8, which was down from a prelim 57.0.

Germany’s services PMI increased from 57.5 to 61.8, which was down from a prelim 62.2.

The Eurozone

In July, the services PMI increased from 58.3 to 59.8 which was down from a prelim 60.4. As a result, the Composite PMI rose from 59.5 to 60.2, down marginally from a prelim 60.6.

According to the finalized survey,

  • Eurozone business activity rose at its fastest rate in just over 15-years.
  • Steep manufacturing output growth complemented a marked pickup in service sector activity.
  • Service sector activity increased at its fastest pace since mid-2006.
  • Economic powerhouse, Germany, saw the rate of expansion accelerate to a record high.
  • While France and Spain registered softer increases in output, Italy’s private sector saw activity growth hit a 3-and-a-half year high.
  • Demand for euro area goods and services rose at the quickest pace since May-2000.
  • Orders both within the euro bloc and from international markets were on the rise, though foreign orders rose at a marginally weaker pace than in June.
  • Employment rose at the fastest pace in almost 21-years. Only France and Spain saw the rate of job creation ease.
  • Input prices rose at the strongest pace since September-2000 but only marginally quicker than in June.
  • Output charge inflation was unchanged from the previous month.
  • Optimism across the private sector fell back to a four-month low.

Also in focus were retail sales figures for the Eurozone.

In June, retail sales increased by 1.5%, month-on-month, falling short of a forecasted 1.8% rise. In May, retail sales had jumped by 4.1%.

From the U.S

ISM Non-manufacturing PMI and ADP nonfarm employment change figures were in focus later in the European session.

In July, the ADP reported a 330K increase in nonfarm payrolls following a 680k rise in June. Economists had forecast a 715k rise.

More significantly, however, was a jump in the ISM Non-Manufacturing PMI from 60.1 to 64.1. Economists had forecast for the PMI to hold steady at 60.1.

At the start of the week, disappointing ISM Manufacturing PMI numbers had raised concerns over the economic outlook. Wednesday’s ISM Non-Manufacturing PMI puts even greater emphasis on Friday’s nonfarm payroll numbers.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. BMW and Daimler rose by 0.77% and by 0.52% respectively. Continental and Volkswagen ended the day with losses of 0.97% and 0.20% respectively, however.

It was also a mixed day for the banks. Deutsche Bank rose by 0.19%, while Commerzbank slid by 5.81%, with earnings results weighing.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.19% and by 1.54% respectively. Soc Gen led the way once more, however, rallying by 2.85%.

It also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 2.26% and by 3.98% respectively.

Air France-KLM rose by 1.23%, while Airbus SE slipped by 0.30%

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Wednesday.

Following a 7.30% slide on Tuesday, the VIX fell by 0.39% to end the day at 17.97.

The NASDAQ rose by 0.13%, while the Dow and the S&P500 ended the day down by 0.92% and by 0.46% respectively.

VIX 050821 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the economic calendar, with the Germany economy back in focus.

Key stats include construction PMI figures for July and factory order figures for June.

Expect the factory order numbers for June to have the greatest impact on the majors.

While the stats will influence, the ECB Economic Bullet due out after the numbers will also draw plenty of attention. ECB sentiment towards the upward trend in new COVID-19 cases globally and the economic outlook will be key areas of focus.

From the U.S, weekly jobless claims and trade data are due out later in the day. Expect any unforeseen slide in claims to test support for riskier assets. With U.S nonfarm payrolls due out on Friday, a marked improvement in labor market conditions could force the FED into action.

Away from the economic calendar, COVID-19 and corporate earnings will also provide direction.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 35 points.

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