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European Equities: No Stats Puts FED Chair Powell Front and Center

Economic Calendar:

Thursday, 11th July

  • German CPI (MoM) (Jun) Final
  • French CPI (MoM) (Jun) Final
  • French HICP (MoM) (Jun) Final
  • ECB Monetary Policy Meeting Minutes

Friday, 12th July

  • Spanish CPI (YoY) (Jun) Final
  • Spanish HICP (YoY) (Jun) Final
  • Eurozone Industrial Production (MoM) (May)

The Majors

The majors closed out a 3rd consecutive day in the red on Tuesday. Leading the way down was the DAX30, which fell by 0.85%. For the EuroStoxx600 and CAC40, the losses were more modest, with the pair ending the day down by 0.51% and by 0.31% respectively.

Things were not so bad over the in the U.S, with tech stocks finding support ahead of FED Chair Powell’s heavily anticipated testimony later today.

The NASDAQ and S&P 500 rose by 0.54% and by 0.12% respectively, while the Dow slipped by 0.08%.

The Stats

There were no material stats out of the Eurozone on Tuesday to provide the majors with direction. The lack of stats left the majors sensitive to moves through the Asian session and FED monetary policy.

Going into the European session, the Asian majors failed to provide much support, with the Nikkei the only major in the green on the day.

On the U.S data front, May’s JOLTs job openings fell from a revised 7.372m to 7.323m, which had a muted impact on the markets. Last week’s nonfarm payrolls led to the markets discounting Tuesday’s numbers.

On the monetary policy front, FED Chair Powell held back from talking on monetary policy or the economy ahead of today’s testimony to Congress.

The downside on the day ultimately came as the markets continued to pare expectations of a FED rate cut at the end of the month.

The Market Movers

From the DAX, there were some heavy losses on the day. Fresenius Medical Care and ThyssenKrupp slid by 4.98% and 3.86% to lead the way down. Deutsche Bank was not far behind, sliding by 3.21% as news hit the wires of bank staff being laid off across the globe. Commerzbank slipped by a more modest 0.29% on the day.

Things were not much better for the auto sector. Continental led the way down, with a 2.19% slide. Daimler was not far behind, falling by 1.26%, while BMW and Volkswagen slipped by 0.23% and by 0.49% respectively.

From the CAC, BNP Paribas and Credit Agricole also saw red, with losses of 0.92% and 0.36% respectively. Renault was amongst the bigger losers on the day, however, falling by 2.26%

The Day Ahead

It’s another quiet day ahead, with no material stats due out of the Eurozone.

The lack of stats will leave markets focused squarely on the FED Chair Powell’s testimony to Congress scheduled for later this afternoon.

Following last week’s U.S nonfarm payroll figures, the markets will finally get some clarity on what lies ahead and whether a rate cut remains on the table.

There is an opportunity for the FED Chair to push back on Trump’s constant calls for a rate cut. The strong NFP numbers certainly caught the markets off-guard on Friday. The FED may well need more time to assess how much damage the U.S – China trade war is, in fact, having on the U.S economy.

Any talk of a hold on rates near-term and expect the majors to take a hit on the day.

The other support mechanism for the majors has been hopes of an end to the U.S – China trade war. Any chatter on trade will also influence, though we would expect Powell to Trump trade war chatter on the day.

Ahead of the European open, the ASX200 and Hang Seng bucked the trend early, rising by 0.65% and by 0.19% respectively. The Nikkei was down 0.12%., with the CSI300 down by 0.13% early in the Asia session.

At the time of writing, the DAX futures was up by 17.5 points, while the Dow Mini was down by 1 point.