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European Equities: Geopolitics and Monetary Policy in Focus

Economic Calendar:

Monday, 17th June

  • French CPI m/m (May) Final

Tuesday, 18th June

  • German ZEW Current Conditions (Jun)
  • German ZEW Economic Sentiment (Jun)
  • Eurozone ZEW Economic Sentiment (Jun)
  • Eurozone Core CPI (YoY) (May) Final
  • Eurozone CPI (YoY) (May) Final
  • Eurozone CPI (MoM) (May)
  • Eurozone Trade Balance (Apr)

Wednesday, 19th June

  • German PPI (MoM) (May)

Thursday, 20th June

  • ECB Economic Bulletin  
  • Eurozone Consumer Confidence Flash

Friday, 21st June

  • French Manufacturing PMI (Jun) Prelim
  • French Services PMI (Jun) Prelim
  • German Manufacturing PMI (Jun) Prelim
  • German Services PMI (Jun) Prelim
  • Eurozone Manufacturing PMI (Jun) Prelim
  • Eurozone Markit Composite PMI (Jun) Prelim
  • Eurozone Services PMI (Jun) Prelim

The Majors

The European majors saw red on Friday. Leading the way down was the DAX30, which fell by 0.6%, reversing a 0.44% gain from Thursday to end the week up 0.42%.

For the CAC40 and the EuroStoxx600, the losses were more modest. The CAC40 fell by 0.15% to end the week up 0.07%, while the EuroStoxx600 fell by 0.4% on the day to end the week up by 0.48%.

The majors came under pressure following an attack on oil tankers in the Gulf on Thursday. U.S President Trump blamed Iran for the attack building tension between the two countries.

While oil prices found support from the attack, concerns over the economic outlook added to the downside on the day.

The impact of the ongoing U.S – China trade war continues to be reflected in China’s economic data, which showed a further weakening in spite of government support.

The Stats

Economic data on Friday was limited to finalized French and Italian May inflation figures that had a muted impact on the majors.

Positive U.S retail sales figures failed to give the majors a boost late in the day, with the latest monthly IEA report delivering more doom and gloom to the markets.

The IEA cut its global oil demand growth forecasts for a 2nd consecutive month, attributing the downward revision to the extended U.S – China trade war and the possibility of a recession.

Earlier in the day, China Industrial production rose by just 5% in May, year-on-year, with fixed asset investment rising by just 5.6%.

The Market Movers

From the DAX, Infineon Technologies (“IFX”) was the worst performer, sliding by 5.4% as global tech stocks continue to struggle amidst the ongoing U.S – China trade war. Global demand for chips is expected to weaken.

From the auto sector, Daimler (-1.2%) and Volkswagen (-0.87%) were also amongst the worst performers on the day. BMW and Continental also saw red, the pair falling by 0.57% and by 1.02% respectively.

The banking sector was also under pressure with Deutsche Bank and Commerzbank falling by 0.72% and by 1.5% respectively.

From the CAC40, the banking sector also saw red, with BNP Paribas and Credit Agricole falling by 0.58% and by 0.87% respectively.

Renault managed to buck the trend on the day, gaining a modest 0.23%.

The Day Ahead

There are no material stats due out of the Eurozone to provide the majors with direction on the day.

While, we can expect market reaction to this afternoon’s NY Empire State Manufacturing Index numbers, U.S – China trade war chatter and any further rise in tensions in the Middle East will likely be the key drivers on the day.

At the time of writing, the DAX was up by 17 points. The Dow Mini was up by 61 points. The upside came off the back of better than anticipated U.S retail sales figures on Friday that supported the Asian majors early on.