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European Equities: New Found Optimism Provides Early Support

Economic Calendar:

Friday, 10th May

  • German Trade Balance (Mar)
  • French Non-Farm Payrolls (q/q (Q1)

The Majors

The majors returned to the red on Thursday, reversing Wednesday’s gains with interest.

Leading the way down was the CAC40, which tumbled by 1.93%. Close behind were the DAX30 and EuroStoxx600, which slid by 1.69% and 1.65% respectively.

Following better than expected industrial production figures out of Germany on Wednesday, there were no material stats for the markets to consider. The focus through the day remained hinged on the U.S – China trade talks.

Trade tensions through the day weighed heavily on the European majors and particularly on sectors most exposed to China. Trump’s talk of China having broken the deal suggested that trade talks would be more tense than usual.

On the DAX, Continental AG was the worst performer of the day, sliding by 4.59%. It was a double whammy for Continental. The Company announced a 22% slide in net profit on Thursday. While delivering a more optimistic outlook for the remainder of the year, U.S – China trade tensions offset any optimism. BMW and Daimler were also among the worst performers, falling by 1.87% and by 1.57% respectively. Volkswagen saw a more modest 1.29% fall.

Across the banking sector, Commerzbank tumbled by 4.27%, while Deutsche Bank slipped by 1.68%.

Elsewhere in the banking sector, Italy’s UniCredit S.p.A slid by 2.69%, with France’s BNP Paribas ending the day with a 2.99% loss.

The Day Ahead

For the day ahead, it’s a relatively quiet day on the data front, with Germany’s March trade data and French 1st quarter nonfarm payrolls due out later this morning.

While the nonfarm payroll figures are unlikely to have an impact, German trade data could weigh on risk appetite. The surplus is forecasted to narrow from €18.7bn to €18.2bn. The devil will be in the details, with export numbers likely to have the greatest impact on the day.

From the U.S, April inflation figures will also have an impact on market risk appetite. Softer than forecasted inflation figures would support appetite for riskier assets on the day.

While we can expect the stats to have an influence, the focus will remain on U.S – China trade talks, however.

Following the 1st day of talks on Thursday, the markets will be looking for trade talks to make sufficient progress to prevent the threatened hike in trade tariffs.

Hopes of progress on trade talks provided early support, though anything can happen later in the day.

At the time of writing, the DAX30 was up by 168.5 points. The U.S futures were also pointing towards a bullish open. The Dow Mini was up by 91 points.