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European Equities: Futures Point South with Economic Data and Brexit in Focus

Economic Calendar:

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bullish start to the month for the European majors on Tuesday. Reversing losses from Monday, the CAC40 rallied by 1.14% to lead the way. The DAX30 and EuroStoxx600 saw more modest gains of 0.69% and 0.65% respectively.

Economic data from China and news of Moderna Inc. submitting a EUA to the FDA provided support to the majors on the day.

Disappointing economic data from the Eurozone and the U.S failed to sink the majors, with the markets expecting a COVID-19 vaccine fuelled economic recovery next year.

The Stats

It was a particularly busy day on the Eurozone economic calendar. November manufacturing PMI figures for Spain, Italy, and Germany unemployment data were in focus through the day.

Finalized manufacturing PMI numbers for France, Germany, and the Eurozone were also out on the day.

The PMIs

In November, Spain’s manufacturing PMI fell from a 3-month high of 52.5 to 49.8. Economists had forecast a fall to 50.5.

Italy’s Manufacturing PMI declined from a 31-month high of 53.8 to 51.5, which fell short of a forecasted 52.0.

The finalized French PMI came in at 49.6, which was up from a prelim 49.1, while down from October’s 51.3, with Germany’s PMI coming in at 57.8. This was down from a prelim 57.9 and from a 31-month high of 58.2 in October.

For the Eurozone, the November PMI came in at 53.8. This was up from a prelim 53.6, while down from October’s 54.8.

According to the Eurozone’s October Markit Survey,

  • Growth in new orders eased to a 5-month low, with new export orders rising at the slowest pace since August.
  • Backlogs increased for a 4th consecutive month, highlighting capacity pressures, while firms cut staffing levels for a 19th month-in-a-row.
  • On the pricing front, input cost inflation accelerated at the sharpest pace in almost 2-years, with output prices also on the rise.
  • Confidence improved to its highest for over two-and-a-half years, with Dutch, German, and Italian companies the most confident.

By Country,

  • With the exception of the Netherlands and Ireland, all countries recorded a weakening in their respective PMIs.
  • Germany remained the best-performing country, followed by the Netherlands and Ireland.
  • While Austria and Italy also reported solid growth, Spain and France reported minor contractions.
  • Greece remained by far the worst-performing.

German Unemployment

November unemployment figures from Germany impressed once more, falling by 39k. Economists had forecast an 8k rise. Following October’s 38k decline, the unemployment rate fell from 6.2% to 6.1% in November.

Eurozone Inflation

Eurozone inflation figures for November failed to impress, however. Consumer prices fell by 0.3%, year-on-year, and by 0.3% month-on-month. Core consumer prices rose by just 0.2%, year-on-year, according to prelim figures.

From the U.S

The market’s preferred ISM Manufacturing PMI fell from 59.3 to 57.5. Economists had forecast a decline to 58.0.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Tuesday. Continental and Volkswagen rallied by 3.45% and by 3.76% respectively to lead the way. BMW and Daimler saw more modest gains of 2.40% and 1.24% respectively.

It was also a bullish day for the banks. Deutsche Bank reversed Monday’s 1.44% loss with a 1.42% gain, with Commerzbank rallying by 3.69%.

From the CAC, it was a bullish day for the banks. Credit Agricole and Soc Gen rallied by 5.49% and by 5.15%, with BNP Paribas rising by 2.89%.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 1.90% and 2.64% respectively.

Air France-KLM resumed its upward trend, rallying by 3.4%, with Airbus SE ending the day up by 1.90%.

On the VIX Index

A run of 5 consecutive days in the red came to an end for the VIX on Tuesday. Partially reversing a 1.30% decline from Monday, the VIX rose by 0.97% to end the day at 20.77.

On Tuesday, the Dow rose by 0.63%, with the NASDAQ and the S&P500 ending the day with gains of 1.28% and 1.13% respectively.

The upside for the VIX came in spite of fresh record highs for the U.S majors, with downside risks lingering in spite of progress towards a COVID-19 vaccine.

VIX 021220 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Unemployment figures from Spain and the Eurozone, and German retail sales figures are due out later this morning.

Barring dire numbers, however, the unemployment figures should have a muted impact on the European majors. Lockdown measures are likely to hurt employment conditions further in the near-term. The progress towards a COVID-19 vaccine has raised the hope of a recovery going into 2021.

Germany’s retail sales figures will influence early in the session, however.

From the U.S, November’s ADP non-farm employment change figures are due out that will draw some interest.

Away from the economic calendar, Brexit and COVID-19 news updates will need continued monitoring. Any progress towards a stimulus package on Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 70 points, with the Dow Mini down by 175 points.

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