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European Equities: Economic Data, COVID-19, and Brexit in Focus

Economic Calendar:

Friday, 27th 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 bearish day for the European majors on Thursday, though the losses were minor with the U.S markets closed. The EuroStoxx600 fell by 0.12%, with the DAX30 and the CAC40 declining by 0.02% and by 0.08% respectively.

Economic data from Germany and the ECB’s sentiment towards the Eurozone’s economic outlook pegged the majors back.

Mid-week, Germany announced plans to extend containment measures to further curb the spread of the coronavirus. While progress towards a COVID-19 vaccine remains positive for the markets, the economic damage stemming from the 2nd wave of the pandemic will need assessment.

The Stats

It was a quiet day on the Eurozone economic calendar. German consumer sentiment figures were in focus on the day.

In December, the GfK Consumer Climate Index fell from -3.1 to -6.7. Economists had forecast a rise to -2.5.

According to the GfK survey,

  • Sentiment in November took a hit as a result of the partial lockdown.
  • The shutdown of the hotel, restaurant, and events industry, as well as the tourism industry, weighed heavily on sentiment.
  • The economic expectation indicator fell by 7.3 points to -0.2, the lowest figure since -10.4 points in May.
  • Income expectations also took a hit, falling by 5.2 points to 4.6, with the propensity to buy indicator falling by 6.5 points to 30.5.

Monetary Policy

From the ECB, the monetary policy meeting minutes were in focus later in the day.

Some key points from the minutes included:

  • After a strong rebound in the summer, the euro area’s economic recovery was losing momentum.
  • The rise in COVID-19 cases and containment measures would restrict activity levels in high contact sectors.
  • There has been a clear deterioration in the near-term economic outlook as a result.
  • Household consumption is expected to remain subdued.
  • Increased uncertainty about the economic outlook and weaker balance sheets were weighing on business investment.
  • Headline inflation declined further to 0.3% in September, with inflation excluding energy and food falling to an all-time low of 0.2%.
  • The ECB expected headline inflation to remain negative through early 2021, longer than in the September baseline projection.
  • Risks surrounding the euro area growth outlook were clearly tilted to the downside.
  • The ECB held monetary policy unchanged ahead of a new round of macroeconomic projections due out in the coming weeks.
  • In December, it was felt necessary for a recalibration of all of its instruments, as appropriate, to ensure that financing conditions remain favorable to support the economic recovery. It was noted, however, that the ECB should not pre-commit itself to specific policy actions.
  • Finally, members agreed that an ambitious and coordinated fiscal stance remained critical and was the most effective policy to deal with the effects of the pandemic.

From the U.S

There were no material stats with the U.S markets closed for Thanksgiving.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Daimler fell by 2.48%, with BMW and Volkswagen declining by 2.08% and by 2.18% respectively. Continental saw a more modest 1.35% loss on the day.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.58% and by 0.38% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole slipped by 0.89% and by 0.47% respectively. Soc Gen fell by 1.21%, however, to lead the way down.

It was also a bearish day for the French auto sector. Peugeot fell by 0.73, with Renault sliding by 2.32%.

Air France-KLM continued to find support, rising by 1.94%, while Airbus SE fell by a further 1.86% following Wednesday’s 2.14% slide.

On the VIX Index

The U.S markets were closed on Thursday for Thanksgiving.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. French consumer spending for October and prelim inflation figures for November are due out. Finalized 3rd quarter GDP numbers are also due out on the day.

We would expect the markets to be relatively nonresponsive to the stats, however. The focus will be on COVID-19 news and Brexit news at the end of the week.

With progress made towards a COVID-19 vaccine, expectations are that containment measures will soon ease. This would support a pickup consumption and economic activity, limiting the impact of backward-looking data. The extent of the economic damage, however, will likely dictate the shape of any economic recovery.

Late in the session, Eurozone consumer confidence figures should also have a muted impact on the majors, barring any major revisions.

From the U.S, there are no material stats, with the U.S markets on a half-day for the Thanksgiving holidays.

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 32 points.

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