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European Equities: U.S Economic Data and COVID-19 in Focus

Economic Calendar

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Inflation YoY Final JUN

The Majors

It was bearish day the European majors on Thursday, following modest moves on Wednesday.

The DAX30 fell by 1.01%, with the EuroStoxx600 and the CAC40 ending the day down by 0.95 and by 0.99% respectively.

Setting the tone ahead of the European open were stats from China, with 2nd quarter GDP numbers in focus.

Quarter-on-quarter, the Chinese economy expanded by 1.3%, which came up short of a forecasted 1.4%. In the 1st quarter, the economy had expanded by 0.6%.

Year-on-year, the economy expanded by 7.9%, however, which was softer than 18.3% growth in the 1st quarter. Economists had forecast growth of 8.3%.

The weaker than expected numbers raised further concerns over the resilience of the global economic recovery, leading to a pullback in the majors going into the open.

Better than expected jobless claim figures from the U.S failed to provide support, with manufacturing sector activity in Philly seeing slower growth.

A continued rise in new COVID-19 cases globally added to the market angst on the day.

The Stats

Finalized inflation figures from Italy were in focus through the early part of the European session.

Italian Consumer Prices

Consumer prices rose by 0.1% in June, according to finalized figures, which was in line with prelim numbers. In May, consumer prices had stalled, month-on-month.

Italy’s annual rate of inflation held steady at 1.3%, which was also in line with prelim figures.

According to istat.it,

  • The stable annual rate of inflation was attributed to regulated and non-regulated energy prices.
  • Regulated energy prices accelerated from +16.8% to +16.9%, with non-regulated ones from +12.6% to +12.8%.
  • Prices for processed food, including alcohol, saw prices fall at a more modest rate. In June prices fell by 0.4%, year-on-year, compared with a 1.1% drop in May.
  • There was a pickup in services related to recreation, which went from null to +1.0%.

From the U.S

It was a busier day on the economic data front, with jobless claim figures back in focus.

June industrial production and July manufacturing sector data were also in focus though had a relatively muted impact on the majors.

In the week ending 9th July, initial jobless claims declined from 386k to 360k.

The Philly FED Manufacturing PMI fell from 30.7 to 21.9, while the NY Empire State Manufacturing Index rose from 17.4 to 43.0.

Industrial production rose by 0.4%, following a 0.7% increase in May. Economists had forecast a 0.6% rise.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen and Continental slid by 2.11% and by 2.03% respectively. BMW and Daimler saw more modest losses of 1.15% and 0.23% respectively, however.

It was a mixed day for the banks. Deutsche Bank declined by 0.42%, while Commerzbank rose by 0.36%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole saw losses of 0.82% and 0.79% respectively, while Soc Gen rose by 0.34%.

It was a bearish day for the French auto sector, however. Stellantis NV and Renault ended the day down by 1.43% and by 2.19% respectively.

Air France-KLM and Airbus SE also saw red, falling by 0.26% and by 0.52% respectively.

On the VIX Index

It was back into the green for the VIX on Thursday, marking a 2nd gain in 5-sessions.

Partially reversing a 4.61% loss from Wednesday, the VIX rose by 4.16% to end the day at 17.01.

The Dow rose by 0.15%, while the NASDAQ and the S&P500 ended the day down by 0.70% and by 0.33% respectively.

VIX 160721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures and trade data for the Eurozone will be in focus later today. We don’t expect any lasting impact from the inflation numbers on the majors.

Trade data for the Eurozone will provide some direction, however.

From the U.S, retail sales and consumer sentiment figures will influence later in the day, however.

Away from the economic calendar, expect news updates on the spread of the Delta variant to also draw interest.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 39 points.

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