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European Equities: German Industrial Production in Focus

Economic Calendar

Wednesday, 7th July

German Industrial Production (MoM) (May)

Thursday, 8th July

German Trade Balance (May)

The Majors

It was a bearish day for the European majors on Tuesday, with the U.S markets reopening after Monday’s holiday.

The CAC40 and the DAX30 fell by 0.91% and by 0.96% respectively, with the EuroStoxx600 ending the day down by 0.52%.

Disappointing economic data from Germany and the Eurozone weighed on the majors as did lingering concerns over the Delta variant.

The Stats

It was another busy start to the European session. German and Eurozone economic sentiment and German factory orders and Eurozone retail sales figures were in focus.

German Factory Orders

In May, factory orders slid by 3.7%, reversing a 0.2% fall from April with interest. Economists had forecast a 1.0% increase.

According to Destatis,

  • Domestic orders increased by 0.9%, while foreign orders tumbled by 6.7%, month-on-month.
  • New orders from the euro area decreased by 2.3% and tumbled by 9.3% from other countries.
  • In May 2021, the manufacturers of intermediate goods saw new orders fall by 3.6%.
  • Orders for capital goods tumbled by 4.6%, while orders for consumer goods rose by 3.9%.
  • Excluding major orders, real new orders in manufacturing were 3.7% lower than in the previous month.

Economic Sentiment

ZEW economic sentiment figures for Germany and the Eurozone disappointed.

Germany’s Economic Sentiment Indicator fell from 79.8 to 63.3 versus a forecasted decline to 75.2.

For the Eurozone, the Economic Sentiment Indicator fell from 81.3 to 61.2, which was worse than a forecasted decline to 78.9.

Eurozone Retail Sales

In May, retail sales increased by 4.6%, reversing a 3.9% fall from April. Economists had forecast a 4.4% rise.

According to Eurostat,

  • Sales of non-food products increased by 8.8% and by 8.1% for automotive fuels.
  • By contrast, food, drinks, & tobacco sales slipped by 0.3%.
  • France and the Netherlands recorded retail sales of 9.9% and 9.3% respectively to lead the way.
  • Compared with May 2020, retail sales jumped 9.0% in the euro area.
  • The jump was driven by a 28.4% surge in automotive fuel sales and a 14.8% increase in non-food product sales.
  • Food, drinks, & tobacco sales rose by just 0.1%.

From the U.S

Service sector PMIs for June also provided direction later in the day, with the market’s favored ISM Non-Manufacturing PMI in focus.

In June, the ISM Non-Manufacturing PMI fell from 64.0 to 60.1. Economists had forecast a decline to 63.0.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. BMW and Daimler slid by 3.41% and by 3.49% respectively, with Continental ending the day down by 3.26%. Volkswagen fell by a more modest 2.79%.

It was a bearish day for the banks. Deutsche Bank and Commerzbank saw losses of 3.53% and 3.11% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen led the way down, falling by 3.19% and by 3.08% respectively. Credit Agricole saw a more modest 2.80% loss on the day.

It was also a bearish day for the French auto sector. Stellantis NV fell by 1.19%, with Renault tumbling by 5.43%.

Air France-KLM and Airbus SE joined the broader market in the red, falling by 1.80% and by 1.95% respectively.

On the VIX Index

A run of 3 consecutive days in the red came to an end for the VIX on Tuesday.

Reversing a 2.21% fall from Friday, the VIX rose by 9.09% to end the day at 16.44.

The NASDAQ gained 0.17%, while the Dow and the S&P500 ended the day down 0.60% and by 0.20% respectively.

VIX 070721 Daily Chart

The Day Ahead

It’s a quieter day ahead on the economic calendar.

German industrial production figures for May will be in focus going into the European open. With little else for the markets to consider early in the day, expect plenty of influence. Following the unexpected slide in factory orders, a marked decline in production would bring further economic uncertainty.

From the U.S, JOLT’s job openings are due out. The numbers will likely have a muted impact on the European majors, however. There will likely be some apprehension ahead of the FOMC meeting minutes due out after the European close.

Away from the economic calendar, the markets will continue to monitor COVID-19 news updates.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 55 points.

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