Futures Fall Despite Solid EPS, Retail Sales Miss, Brexit Deal Remains Elusive

Futures Fall As Worries Creep  Back Into Focus

The U.S. equity market is indicated lower in early Wednesday trading despite signs 3rd quarter earnings are better than expected. The Dow Jones Industrial Average and S&P 500 are both indicated lower by 0.20% while the NASDAQ Composite is down about -0.30%. The move is driven by growing concern China will not follow through on its pledge to buy more U.S. agricultural products. If this is the case it is likely additional tariffs will be enforced later this year. China has pledged as part of the Phase I trade deal to buy up to $50 billion in U.S. products.

In earnings news, financial stocks Bank of America and Bank Of New York Mellon both reported better than expected EPS. Both companies reported strength in consumer segments that helped drive share prices higher. Shares of BAC are up more than 2.5% while BNY-Mellon is up about 1.5%. In economic news, Retail Sales were weaker than expected. September retail sales fell -0.3% versus an expected gain of 0.3%. The mitigating factor is an upward revision to the past month of 0.2%. Later in the session traders will have an eye out for the NAHB Index and the FOMC’s Beige Book.

Europe Mixed, Brexit Deal Is Still Elusive

European markets are flat and mixed at midday as traders fret over trade and the Brexit. On the trade front, China’s demands the U.S. remove the threat of more tariffs before signing the Phase I deal has thrown a wrench into the works. At this stage it is becoming less and less likely Phase I will come to fruition. In Brexit news, negotiations stalled on Wednesday despite a narrowing of differences. The Irish PM confirms the back-stop is yet to be resolved but there is hope. The two sides will begin a two-day summit tomorrow that will, hopefully, result in a deal.

The German DAX is in the lead at midday with a gain of 0.22% while the FTSE and CAC are both edging lower. In stock news, shares of UK tech giant Micro Focus is up 4.3% on its results as is seafood producer Mowi. At the other end of the rankings, IMCD and DBA Aviation are both down more than -4.0%.

Asia Mostly Higher On Brexit Hopes

Asian markets are mostly higher at the end of Wednesday’s session. The Nikkie and ASX are both up more than 1.0% while the Hang Seng and Kospi are up closer to 0.70%. The moves are driven by hope for a Brexit deal, however elusive it may seem right now. In Hong Kong, leader Carrie Lam is under intensifying pressure as she rejects HK’s bid for autonomy. The Shanghai composite is the only index to move lower, it posted a loss of -0.41%.

European Equities: Brexit, Earnings and Economic Data in Focus

Economic Calendar:

Wednesday, 16th October

  • Italian CPI (MoM) (Sep) Final
  • Eurozone Core CPI (YoY) (Sep) Final
  • Eurozone CPI (MoM) (Sep)
  • Eurozone CPI (YoY) (Sep) Final
  • Eurozone Trade Balance (Aug)

The Majors

It was a bullish day for the European majors on Tuesday. The DAX30 led the way, rallying by 1.15%, with the EuroStoxx600 and CAC30 up by 1.11% and 1.04% respectively.

Following a bearish start to the week, the majors were able to brush aside continued uncertainty over the ongoing U.S – China trade war.

Positive updates on Brexit from the EU on the possibility of a Brexit deal this week provided strong support for the majors.

Michael Barnier, the EU’s chief negotiator, spoke on Tuesday of a deal still being possible this week.

From the U.S, corporate earnings were a boost for the global equity markets, with JPMorgan earnings impressing.

The Stats

It a relatively busy day on the Eurozone economic calendar on Tuesday. Economic data included Germany and the Eurozone’s ZEW economic sentiment figures for October.

Of less influence on the day were Germany’s ZEW current conditions and French finalized September inflation figures.

According to the latest ZEW report,

  • The German ZEW Current Conditions Index fell from -19.9 to -25.3 in October. Economists had forecast a decline to -26.0.
  • Germany’s ZEW Economic Sentiment Index fell from -22.5 to -22.8 in October, which was better than a forecast of -27.0
  • The Eurozone’s ZEW Economic Sentiment Index fell from -22.4 to -23.5 in October. Economists had forecast a decline to -33.0.

Concerns over a possible recession weighed on consumer sentiment at the start of the 4th quarter, with progress in the U.S – China trade talks having provided little comfort.

From the U.S, a modest pickup in manufacturing sector activity in New York State was enough to avoid stressing the majors. The NY Empire State Manufacturing Index rose from 2 to 4 in October.

The Market Movers

For the DAX: Autos found strong support, with BMW leading the way, rallying by 2.45%. Daimler was also amongst the best performers on the DAX, rallying by 2.26%. Continental and Volkswagen weren’t far behind, with gains of 1.8% and 2.20% respectively.

Bank stocks also found further support. Deutsche Bank rallied by 2.88% to lead the way on the DAX30, while Commerzbank rose by 0.97%

From the CAC, it was also a bullish day for the banks. BNP Paribas and Soc Gen led the way with gains of 3.64% and 2.12% respectively. Credit Agricole saw a more modest rise of 1.51%. For the autos, it was also positive with Renault rising by 1.36%, while Peugeot rallied by 2.85%.

On the VIX Index

The VIX Index saw red for a 5th consecutive day on Tuesday, declining by 7.07%. Following on from a 6.48% fall on Monday, the VIX ended the day at 13.5.

Progress on Brexit and U.S corporate earnings, with JPMorgan Chase earnings, in particular, supported risk appetite on the day.

VIX 16/10/19 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Economic data includes finalized September inflation figures for Italy and the Eurozone. Alongside the inflation figures, the Eurozone’s August trade data is also due out.

We would expect the inflation figures to have a relatively muted impact on the majors, however, with Brexit and corporate earnings in focus.

A material narrowing in the Eurozone’s trade surplus could test the majors in the early part of the session.

From the U.S, September retail sales figures will provide direction later in the day. With recession talk continuing to do the rounds, any unexpected slide in sales will impact.

On the earnings front, corporate earnings from the U.S will also have influence. Bank of America and Morgan Stanley’s 3rd quarter results are in focus.

While U.S stats and corporate earnings will be key, expect Brexit chatter to have the ultimate say on the day. With just days remaining until the EU Summit, it’s crunch time for Boris and the Brexiteers.

In the futures market, at the time of writing, the DAX30 was down by 11 points, with the Dow down by 50 points.

Futures Rise, Earnings Season Off To Shaky Start, Trade Concerns Dampen Investor Appetite

The U.S. Futures Are Rising In Early Trading

The U.S. indices are indicated higher in early trading as earnings season kicks off. Today’s news includes reports from more than a half-dozen important names and the results are mixed. The big banks are the main focus as JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup all report. JP Morgan posted a nice beat on the top and bottom lines driven by strength in consumer lending. Citigroup, Goldman Sachs and Wells Fargo are all trading lower after reporting weaker than expected numbers.

In other news, United Health and Johnson & Johnson both beat expectations. Johnson & Johnson also reports strength in the consumer units while United Health upped its full-year guidance. Both stocks are moving higher by roughly 2.0%.

The Down Jones Industrial Average, S&P 500, and NASDAQ Composite are all up about 0.25% in early trading. The sentiment is buoyed by trade hopes but also tempered by caution. While China and the U.S. have signaled a Phase 1 deal is at hand there is still no deal in place. Until such time traders are cautioned to be prepared for negative headlines. On the economic front, the Empire State Manufacturing Survey rose modestly to 4 from last months 2.0 as production and employment edge higher.

European Markets Are Mixed, Hope For A Smooth Brexit Persist

European markets are mixed at midday on Tuesday after remarks from the EU’s Brexit team renewed hope. Michel Barnier said that despite the increasing difficulty it is still possible to reach a deal this week. The DAX and CAC are both up about 0.35% to 0.40% while the FTSE is down roughly -0.25%. Retail is in the lead with a gain of 0.90%.

In economic news, unemployment ticked higher in the UK. The 3rd quarter figure came in at 3.9%, a tenth higher than the previous. In stock news, shares of Hays are up 5.5% after it reported flat results. The good news is weakness in the UK was offset by strength in offshore markets. Share of Wirecard, however, are not so buoyant. The Financial Times did an expose on the company’s accounting practices and shares are down -17% because of it.

Asia Mixed, Trade Hopes Clash With Trade Fears

Asian markets are wildly mixed after Tuesday’s session. The Japanese Nikkei led the market with a gain of 1.9% after being closed Monday for holiday. Chinese indices are broadly lower following the release of inflation data. CPI rose 3% on a 69% increase in pork prices while PPI fell. The Shanghai Composite is down -0.56% on the news, the Hang Seng a more tepid -0.07%. Elsewhere in the region, the ASX and Kospi are both up mildly.

European Equities: Brexit, Corporate Earnings and Stats in Focus

Economic Calendar:

Tuesday, 15th October

  • French CPI (MoM) (Sep) Final
  • French HICP (MoM) (Sep) Final
  • German ZEW Current Conditions (Oct)
  • German ZEW Economic Sentiment (Oct)
  • Eurozone ZEW Economic Sentiment (Oct)

Wednesday, 16th October

  • Italian CPI (MoM) (Sep) Final
  • Eurozone Core CPI (YoY) (Sep) Final
  • Eurozone CPI (MoM) (Sep)
  • Eurozone CPI (YoY) (Sep) Final
  • Eurozone Trade Balance (Aug)

The Majors

It was a bearish start to the week for the European majors. The CAC40 led the way down, falling by 0.4% on Monday. The DAX30 and EuroStoxx600 weren’t far behind with losses of 0.20% and 0.49% respectively.

Uncertainty over the U.S – China trade war and Brexit weighed on the broader markets on the day.

While the U.S agreed to defer the rollout of further tariffs on Chinese goods tomorrow, a lack of commitment to removal existing tariffs weighed on risk sentiment.

On the Brexit front, a lack of progress from last week’s hopes of a deal added to the downside on the day.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Economic data was limited to the Eurozone’s industrial production figures for September.

According to Eurostat, industrial production rose by 0.4%, month-on-month in August, reversing a 0.4% decline in July. Economists had forecast a 0.3% rise.

  • The production of capital goods rose by 1.2% and intermediate goods by 0.3%.
  • Weighing in August, however, was a 0.3% fall in the production of consumer goods and a 0.6% fall in energy and non-durable consumer goods production.
  • Malta (+5.6%), Estonia (+3.9%) and Latvia (+3.0%) reported the highest increases in production.
  • Slovakia (-2.6%) and Lithuania (-2.4%) reported the largest declines in August.
  • Year-on-year, production fell by 2.8%.

With a lack of U.S stats on the day, geopolitical risk offset upbeat industrial production figures on the day.

The Market Movers

For the DAX: Autos found more upside on Monday, supported by the delay of additional tariffs on Chinese goods. Continental led the way, rising by 0.52%. BMW (+0.50%) and Daimler (+0.40%) saw more modest gains, whilst Volkswagen bucked the trend on the day, however, falling by 0.12%.

Bank stocks found further support, with Deutsche Bank rising by 0.75% and Commerzbank by 0.69%

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen fell by 0.79% and by 0.16% respectively. Credit Agricole managed to buck the trend with a 0.22% gain. For the autos, it was also mixed with Renault rising by 0.69%, while Peugeot slipped by 0.87%.

On the VIX Index

The VIX Index saw red for a 4th consecutive day on Monday, falling by 6.48%. Following on from an 11.33% slide on Friday, the VIX ended the day at 14.6.

Losses on the day came in spite of the U.S majors closing out the day in the red. While existing tariffs on Chinese goods remain, last week’s progress on trade talks was enough to pin back the VIX.

VIX 15/10/19 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Economic data includes October economic current conditions and economic sentiment figures out of Germany and the Eurozone.

Germany and the Eurozone’s economic sentiment figures will be the key drivers, which is forecasted EUR negative.

Of less influence on the day will be finalized September inflation figures due out of France.

From the U.S, New York Empire State Manufacturing Index figures for October will also provide direction late on.

Another pullback in the Index would add further pressure on the European majors.

On the earnings front, corporate earnings from the U.S will also have an impact. Citigroup, Goldman, JPMorgan, and Wells Fargo release 3rd quarter results later today.

Geopolitics will also influence on the day, as Johnson looks to wrap up a Brexit deal ahead of the EU Summit this weekend.

In the futures market, at the time of writing, the DAX30 was up by 17 points, with the Dow up by 16 points.

Futures Fall As Uncertainty Grips The Market, Brexit Deal Elusive, China Trade Data Falls

The U.S. Futures Are Down In Early Trading

The U.S. futures are down in early trading despite positive developments on trade. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 are all down about -0.55% in early trading. Tech is in the lead. The trade deal, announced on Friday, is an interim stop-gap measure intended to produce a three-phase solution. The first phase includes China increasing its purchases of agricultural products, a pledge the country has made several times in the past. In exchange, the U.S. will postpone or delay tariffs scheduled to take effect later this week.

While both sides have hailed the deal as good there is still no actual document and details are sketchy. China’s Vice Premier Liu He says he will be back to Washington this month to hammer out those details before President Xi will sign any deal. China is expected to purchase up to $50 billion in U.S. agriculture products with those purchases ramping up over the next few weeks. The timeline to end the trade war is now 15 months. Secretary of the Treasury Mnuchin says the October tariffs will go into effect in December if China reneges on its agreements.

In business news, this week begins the peak of 3rd quarter earnings. We are expecting reports from the big banks this week, they are expected to post EPS declines. In economic news, we are expecting several key reads from the Federal Reserve. Also on tap, Retail Sales, the Beige Book, Housing Starts, and the Index of Leading Indicators.

European Indices Are Down With A Case Of Uncertainty

EU indices are down at midday due to a growing case of uncertainty. The trade-deal that is not yet a deal remains a key point of uncertainty as does the Brexit. Brexit negotiators were unable to reach a deal over the weekend raising doubts a solution to the Irish-Backstop can be found. The Queen is expected to deliver her speech to open Parliament today. In it, she will outline the governments plans for Brexit.

The French CAC is leading decliners in early trading with a loss of -0.75% while the DAX and FTSE are both trailing with losses close to -0.50%. In stock news, shares of biopharma company Chr. Hansen rebound 3.8% after last week’s massive selloff.

Asian Markets Rebound Despite Trade Uncertainty

Asian markets are broadly higher after Monday’s session as trade hope fuels optimism. The Shanghai Composite and Korean Kospi both advanced more than 1.1% while the Hong Kong Hang Seng and Australian ASX gained 0.80% and 0.50%. Japan was closed for a holiday. In South Korea chipmakers Samsung and SK Hynix led the advance.

U.S. Stocks Turn Lower as Investors Sour on ‘Phase One’ Trade Deal

The major U.S. stock index futures turned lower for the pre-market session Monday morning and hedgers returned to the Treasury bonds, gold and Japanese Yen after China said it needed to have further discussions before it would sign off on the so-called phase one trade deal President Donald Trump announced on Friday.

The early market price action has the S&P 500 Index opening about 0.42% lower, the Dow off by 95 points or 0.35% and the NASDAQ Composite trading about 0.54% lower.

China Wants More Talks Before Signing ‘Phase One’ Deal

According to a Bloomberg report, China trade officials wanted more talks by the end of October to discuss details of the “phase one” trade deal.

This now has investors wondering if the additional tariffs originally scheduled to start on October 15, and suspended as of Friday, are back on. We’ll probably hear more about this from the Trump administration later in the session.

On Friday, President Trump announced that the first phase of a deal with China had been agreed, though officials on both sides said much more work needed to be done.

However, the deal that does not include many details and Trump has warned it could take up to five weeks to get a pact written. Furthermore, analysts are saying it appears to be more of a “temporary” than a real trade pact.

Investors took no chances upon hearing the news. Besides driving stocks lower and erasing some of Friday’s gains, hedgers drove December Treasury Notes 0.46% higher. December Comex gold futures rose 0.73% and the Japanese Yen jumped 0.24% higher. These protection moves are likely to increase if investors continue to turn sour on the deal.

Asian Markets Up, Europe Down

Shares in Asia rose in reaction to Friday’s partial trade deal news. Investors had no reaction to the Bloomberg report, which came out after the Asian markets had closed.

The major bourses in Europe turned lower after the report was released. According to CNBC, the pan-European Stoxx 600 slipped 1.1% during the morning trade, with basic resource stocks losing 2.6% to lead losses as all sectors traded in negative territory.

The Bloomberg report was not a complete surprise as Citi analysts pointed out in an earlier report.

“Despite what appears to have been achieved in the October talks, we remain cautious on an eventual trade deal,” the analysts wrote in a note. “The US offers are far from what China has been demanding, as showcased in its June State Council White Paper:  reasonable purchases of US imports, removal of existing tariffs, and giving the trade document a balanced treatment.”

In other news, customs data showed that China’s import and export figures were worse than expected in September, with exports falling 3.2% on the year in U.S. dollar terms, while imports declined 8.5%, according to Reuters.

European Equities: China Trade Data and Geopolitics to Influence

Economic Calendar:

Monday, 14th October

  • Eurozone Industrial Production (MoM) (Aug)

Tuesday, 15th October

  • French CPI (MoM) (Sep) Final
  • French HICP (MoM) (Sep) Final
  • German ZEW Current Conditions (Oct)
  • German ZEW Economic Sentiment (Oct)
  • Eurozone ZEW Economic Sentiment (Oct)

Wednesday, 16th October

  • Italian CPI (MoM) (Sep) Final
  • Eurozone CPI (MoM) (Sep)
  • Eurozone Trade Balance (Aug)

The Majors

It was a bullish end to the week for the majors, with the DAX rallying by 2.86% to lead the way. The EuroStoxx600 and CAC40 weren’t far behind with gains of 2.31% and  1.73% respectively.

Support for the majors came off the back of news that the U.S administration delayed the rollout of fresh tariffs on Chinese goods. Tariffs were due to hit Chinese goods on 15th October.

Progress on trade talks in Washington led to the delay.

Brexit also provided support as the EU affirmed that progress was indeed being made on an alternative to the Irish backstop.

The Stats

It a relatively busy day on the Eurozone economic calendar on Friday. Economic data included German and Spanish finalized inflation figures for September.

Out of Germany, consumer prices held steady in September, which was in line with prelim figures. In August, consumer prices had fallen by 0.2%.

Inflationary pressures eased in Spain, however, with consumer prices rising by just 0.1%, month-on-month, which was in line with forecast. Consumer prices had risen by 0.3% in August.

From the U.S, a pickup in consumer expectations and sentiment for October also provided support on the data front.

Further upside in consumer sentiment can be expected as the U.S and China make progress on ironing out a trade agreement.

The Market Movers

For the DAX: Autos found further support on Friday, driven by updates from the U.S – China trade talks in Washington. Volkswagen led the way, rallying by 4.71%. Daimler (+3.13%), Continental (+2.50%), and BMW (+3.13%) weren’t far behind.

Bank stocks also found support, with Deutsche Bank rallying by 4.96% and Commerzbank by 4.09%

From the CAC, it was also a positive day for the banks. Soc Gen led the way, rallying by 5.27% off the back of a  3.32% gain on Thursday. BNP Paribas and Credit Agricole weren’t far behind, with gains of 4.72% and 4.52% respectively. For the autos, Renault jumped by 5.12%, while Peugeot up by 4.63% following a 3.48% gain on Thursday.

On the VIX Index

The VIX Index saw red for a 3rd consecutive day on Friday, sliding by 11.33%. Following on from a 5.74% fall on Wednesday, the VIX ended the day at 15.6.

Further progress on the U.S – China trade talks and Brexit supported risk appetite to pull the VIX back into the red.

VIX 14/10/19 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Economic data out of the Eurozone is limited to August’s industrial production figures.

Better than forecasted production figures would provide support in the early part of the session.

A lack of stats due out of the U.S, however, will leave geopolitics to continue to influence in the day.

Ahead of the European open, trade data due out of China through the Asian session will set the tone. Any weak numbers and expect market jitters over the global economy to return.

In the futures market, at the time of writing, the DAX30 was down by 35 points, while the Dow was up by 38 points.

The Week Ahead – Brexit, Earnings, Stats and the IMF and EU Summit in Focus

On the Macro

For the Dollar:

It’s a busier week ahead on the economic calendar.

NY Empire State Manufacturing figures for October get the week going on Tuesday. The focus will then shift to September retail sales figures due out on Wednesday.

With a heavy reliance on consumer spending, the numbers will need to be in line with forecasts to provide Dollar support.

On a busy Thursday, September building permit and housing start figures are due out along with October’s Philly FED Manufacturing numbers.

September industrial production and the weekly jobless claims figures are also due out.

With no material stats due out on Friday, Wednesday’s retail sales and Thursday’s Philly FED numbers will have the greatest impact.

Outside of the stats, trade war chatter will continue to be a factor, as will any further talk of impeachment.

The Dollar Spot Index ended the week down by 0.55% to $98.301.

For the EUR:

It’s also a relatively quiet week ahead on the economic data front.

Industrial production figures on Monday and German and Eurozone economic sentiment figures on Tuesday will influence early in the week.

The Eurozone’s September inflation and industrial production figures due out on Wednesday will also provide direction.

We would expect finalized inflation figures out of France and Italy to have a muted impact on the EUR, however.

With no material stats due out in the latter part of the week, geopolitical risk will remain in focus.

Any talk of U.S tariffs on EU goods and chatter on Brexit ahead of the 19th October EU Summit will also need considering.

The EUR/USD ended the week up by 0.58% to $1.1042.

For the Pound:

It’s another busy week ahead on the economic calendar.

Key stats include employment figures due out on Tuesday, inflation figures on Wednesday and retail sales numbers on Thursday.

On the data front, claimant counts, inflation and retail sales figures will be the key drivers in the week.

On the Brexit front, there would be more upside for the Pound should Johnson finalize a deal ahead of next weekend’s EU Summit.

The GBP/USD ended the week up by 2.73% to $1.2668.

For the Loonie:

It’s a relatively busy week ahead on the data front.

Key stats include September inflation figures due out on Wednesday and August manufacturing sales numbers due out on Thursday.

On the data front, we would expect the inflation figures to be the key driver in the week.

From elsewhere, trade data, industrial production and 3rd quarter GDP numbers out of China will also influence.

The Loonie ended the week up by 0.83% to C$1.3203 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats are limited to September’s employment numbers due out on Thursday.

On the monetary policy front, the RBA minutes are due out on Tuesday and could pressure the Aussie Dollar should there be suggestions of more rate cuts to come.

From elsewhere, economic data out of China on Monday and Friday will also influence.

The Aussie Dollar ended the week up by 0.34% to $0.6794.

For the Japanese Yen:

It’s a relatively quiet week ahead on the economic calendar.

Key stats are finalized industrial production figures due out on Tuesday and inflation and trade data on Friday.

We would expect the stats to have a relatively muted impact on the Yen, however.

Geopolitics and economic data out of the U.S and China will likely have the greatest impact in the week.

The Japanese Yen ended the week down by 1.26% to ¥108.29 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side in the week ahead.

Economic data is limited to 3rd quarter inflation figures that are due out on Wednesday. We can expect the Kiwi to be particularly sensitive to the numbers.

From elsewhere, stats from China will also influence in the week.

The Kiwi Dollar ended the week up by 0.27% to $0.6337.

Out of China:

It’s a busy week on the economic data front. Economic data includes trade data due out on Monday and inflation figures on Tuesday.

The focus will then shift to a busy Friday. Stats on Friday include fixed asset investment, industrial production and 3rd quarter GDP numbers.

We expect trade data, industrial production, and the GDP numbers to have the greatest impact on market risk sentiment.

The impact of any weak numbers could be buffered, however, by any further positive chatter on trade.

The Yuan ended the week up by 0.83% to CNY7.0892 against the Greenback.

Geo-Politics

Impeachment: With the U.S and China making progress on trade, impeachment chatter could return in the week ahead.

Trade Wars: 15th October U.S tariffs on Chinese goods have been postponed as progress was made last week. For real progress to be made, however, the U.S would need to remove existing tariffs that continue to hurt the Chinese economy. Expect more chatter in the week, which will influence risk sentiment.

UK Politics: Brexit talks continue, with a deal now needed to support further the Pound ahead of the EU Summit. Any suggestions that the latest proposal is inadequate and expect the Pound to slide.

The Rest

Earnings:  It’s a big week ahead, with U.S banks Citi, Goldman, JPMorgan, and Wells Fargo announcing.

EU Summit: It is make or break for Boris Johnson and the Brexiteers. Will there finally be an agreement for the British PM to take back to parliament?

IMF Annual Meeting: Chatter on the global economy and what can be done to drive growth will influence. Will there be any agreements to ramp up fiscal spending to offset the effects of the ongoing U.S – China trade war?

European Equities: A Week in Review – 11/10/19

The Majors

It was a bullish week for the European majors, with the DAX30 rallying by 4.15% to lead the way. The CAC30 and EuroStoxx600 weren’t far behind, with gains of 3.23% and 3.00% respectively.

After a bearish start to the week, 3 consecutive days in the green delivered, with the lion’s share of the gains coming on Friday.

Economic data through the week failed to weigh on the majors, with geopolitics delivering the upside in the week.

Progress on Brexit negotiations and positive updates from the U.S – China trade talks drove demand for the European majors.

U.S President Trump said on Friday that discussions were very good and that there were warmer feelings at the latest talks,

On Brexit, positive updates from Johnson, Irish Prime Minister Varadkar and from the EU in the 2nd half of the week also supported.

Monetary Policy

The ECB’s monetary policy meeting minutes on Thursday had little influence on the majors. While having little influence, the minutes did reveal division amongst members on what lies ahead. Recent ECB member commentary had already alerted the markets of a rift amongst members, with a number of key members against the reintroduction of bond purchases.

The Stats

It was a relatively quiet week on the Eurozone economic calendar. Through the week, Germany’s August factory orders and trade data were negative for the DAX, while an unexpected pickup in industrial production was positive.

On Monday, factory orders fell by 0.6% in August, following on from a 2.7% slide in July. A 0.3% rise in industrial production, reversing a 0.4% fall in July, had little impact on Tuesday, as market jitters ahead of trade talks pinned back the majors.

A narrowing in Germany’s trade surplus from €20.5bn to €18.1 did little to dampen demand for riskier assets on Thursday.

The positive updates from both Brexit and trade talks in Washington drove demand for the European majors on Thursday and Friday.

At the end of the week, finalized inflation figures out of Germany and Spain also had a muted impact, with further updates on Brexit and trade talks driving the majors on the day.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Volkswagen led the way, rallying by 8.55%. Daimler and BMW also saw solid gains, rising by 6.25% and 3.08% respectively. Continental trailed the pack, however, rising by just 0.02%.

It was also bullish for the banking sector. Deutsche Bank gained 3.98%, with Commerzbank rallying by 4.92%, to partially reverse last week’s 8.42% tumble.

While the stats were on the weaker side, a trade agreement would ease concerns over the economic outlook.

From the CAC, the banks also found strong support. BNP Paribas and Soc Gen led the way, rallying by 8.19% and by 7.95% respectively. Credit Agricole trailed with a 6.10% gain. French autos saw green following 3 consecutive weeks in the red. Peugeot rallied by 6.52%, with Renault up by 6.10%.

On the VIX Index

The VIX Index fell by 8.57% in the week ending 11th October. Following on from a 0.7% fall from the previous week, the VIX ended the week at 15.6.

After a Tuesday 13.6% jump in the VIX, it was red through the rest of the week. Sentiment towards Brexit and U.S – China trade talks offset a negative bias on the economic data front.

VIX Weekly Chart 12/10/19

The Week Ahead

It’s a relatively busy week on the Eurozone economic calendar. Key drivers include German and, Eurozone economic sentiment figures on Tuesday. The Eurozone’s industrial production and trade data due out on Monday and Wednesday will also influence.

From elsewhere, China’s trade data and industrial production and 3rd quarter GDP numbers on Friday will also influence risk appetite.

While economic data is on the heavier side, continued progress on Brexit and the U.S – China trade talks will buffer the effect of any disappointing figures.

A delay to tariffs that were due to be introduced on 15th October, was key in the week.

Looking at the forecasts, Eurozone and China economic stats are skewed to the negative.

The Weekly Wrap – Progress on Brexit and Trade Delivered in the Week

The Stats

It was a quieter week on the economic calendar in the week ending 11th October.

A total of 44 stats were monitored throughout the week, following 74 stats from the week prior.

Of the 44 stats, 17 came in ahead forecasts, with 22 economic indicators coming up short of forecast. 5 stats were in line with forecasts in the week.

Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 25, 20 stats reflected a deterioration from previous.

While the economic data was skewed to the negative, the Dollar struggled in the week, as demand for the dollar eased off the back of positive updates from trade talks and Brexit.

The U.S Dollar Index (“DXY”) fell by 0.55% to end the week at $98.301.

Out of the U.S

It was a relatively quiet week on the economic data front. Wholesale inflation figures on Tuesday and September inflation figures on Thursday provided direction early in the week.

wholesale and consumer prices were on the softer side in September, pinning back the greenback.

On Friday, positive Michigan’s consumer expectations and sentiment figures failed to support the Greenback.

Off less influence in the week, were JOLTs job openings, initial jobless claims and import and export price index figures.

Outside of the stats, the FOMC meeting minutes revealed some debate on when to end the current rate path. Rising concerns over the economic outlook suggested that more cuts could be on the way.

The reality was, however, that just 7 of 17 FOMC members foresaw a further rate cut before the year-end.

Downside for the Dollar ultimately came from an easing in geopolitical risk, with most of the damage coming at the end of the week.

In the equity markets, a Friday rebound pulled the majors into the green for the week. The Dow and S&P500 ended the week up by 0.91% and 0.62% respectively, with the NASDAQ up 0.93%.

Out of the UK

It was a busy week on the economic calendar.

Key stats included GDP, industrial and manufacturing production and trade data on Thursday.

While production was on the slide, quarter-on-quarter GDP numbers continued to show the UK economy dodging a recession. The numbers were ultimately Pound positive.

Of less influence in the week were housing sector figures, labor productivity, and retail sales numbers.

While the stats were supportive of the Pound, the upside ultimately came from Brexit news.

Progress towards a possible trade deal, ahead of next week’s EU Summit, drove demand for the Pound.

The Pound ended the week up by 2.73% to $1.2668.

For the FTSE100, a stronger Pound failed to pressure the 100, with the index rising by 1.28%.

Out of the Eurozone

It was particularly quiet week on the economic data front.

Germany’s factory orders and trade data provided little support in the week, with factory orders falling again and the trade deficit narrowing.

On the positive, however, was an unexpected rise in industrial production.

At the end of the week, finalized September inflation figures out of Germany and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB monetary policy meeting minutes also left the EUR unscathed.

The upside in the week ultimately came from positive updates on Brexit and progress on the U.S – China trade talks.

For the week, the EUR rose by 0.58% to $1.1042.

For the European major indexes, the DAX30 rallied by 4.15%, with the EuroStoxx600 and CAC40 up by 3.23% and 3.00% respectively.

Elsewhere

It was another positive week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 0.34% to $0.6794, while the Kiwi Dollar gained 0.27% to $0.6337.

For the Aussie Dollar

It was a quiet week for the Aussie Dollar.

Economic data was limited to September’s business confidence and October consumer sentiment figures.

Both business and consumer confidence figures disappointed in the week, pinning back the Aussie Dollar.

Of less influence were home loan figures that continued to reflect improved housing sector conditions.

In spite of the negative bias on the stats, a Friday rally in the Aussie Dollar delivered the gains for the week. Positive updates on trade talks delivered the upside on the day.

For the Kiwi Dollar

The stats were, once more, skewed to the negative in the week.

September’s Business PMI held steady at 48.4, coming up short of a forecast of 49.0. Electronic card retail sales also came up short of forecasts, whilst up by 0.4% in September.

While the stats were skewed to the negative on Friday, a 0.27% gain on the day gave the Kiwi Dollar the upside for the week.

For the Loonie

Through the 1st half of the week, housing sector figures impressed, proving some support.

Employment figures on Friday were the key driver, however, with the unemployment rate falling from 5.7% to 5.5%. A 53k rise in employment, following an 81.1k increase in August, delivered on the day.

Positive updates from trade talks also delivered provided support late in the week, with WTI and Brent gaining 3.58% and 3.54% respectively.

The Loonie ended the week up by 0.83% to C$1.3203 against the Greenback.

For the Japanese Yen

It was a relatively quiet week on the data front. Stats were limited to August household spending figures that came in worse than forecasts.

While the stats were Yen negative, the downside from the Yen came from an easing in geopolitical risk.

Safe-haven demand waned as progress on Brexit negotiations and trade talks spurred demand for riskier assets.

For the week, the Japanese Yen fell by 1.26% to ¥108.29.

Out of China

It was a quiet week on the economic data front.

September’s service sector PMI, which reported slower sector growth, tested risk sentiment on Monday.

A lack of stats through the remainder of the week left updates from the U.S – China trade talks to influence risk sentiment.

The Yuan rose by 0.83% to CNY7.0892 against the Greenback.

U.S. Futures Strongly Higher, Hopes For Brexit Deal Stoked , China Announces Financial Reforms

The U.S. Futures Are Ripping Higher

The U.S. equities futures are ripping higher in early trading following positive news regarding trade. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all up more than 1.0% in early Friday trading. The spark that ignited this move is positive news on trade, news that suggests a temporary deal may be reached sometime today. Yesterday, a Tweet from Donald Trump that the talks were going “really well” was compounded today by another source who says the talks went “probably better than expected”.

Chinese Vice Premier Liu He is expected to meet with Donald Trump in the Oval Office later today. During the previous negotiations session, such a meeting preceded important concession from both sides. In stock news, shares of FAANG stocks are up more than 1.0% while the financials are close behind. Investors are also closely watching earnings. Next week the big banks are slated to report and open peak earnings season.

Europe Higher, Brexit Deal In Sight

European markets are also moving higher in early trading. The DAX is up about 2.0% while the CAC trails with a gain of 1.0% and the FTSE lags at 0.60% In Brexit news, Irish PM Leo Varadkar said a deal might be clenched by the deadline after a meeting with UK PM Boris Johnson. The two are trying to work out a solution to the Irish-Backstop, it appears they have hit on a promising possibility. JP Morgan, in the wake of this news, raised their odds of a smooth Brexit from 5% to 50%.

In stock news, tech is in the lead at midday with a gain greater than 3.0%. At the other end of the spectrum, shares of ad-company Publicis are down -13% after cutting full-year guidance. Energy is also a strong performer in the early part of today’s session. Brent and WTI are both up nearly 2.0% after Iran reported one of its tankers was struck by missiles. The tanker was traveling close to Saudi shores, the Saudis have not made a comment but it is possible they are retaliating for damage done last month.

Asian Markets Move Higher

Asian markets closed higher on rising trade hopes. The Hong Kong Hang Seng led the day in Friday’s session with a gain of 2.34%. The move was boosted by a 4.5% increase in CNOOC, China’s national oil company. The Nikkei is in the runner-up position with a gain of 1.15% while most others in the region advanced 0.80% to 0.90%. In China, China’s financial regulator has laid out a timeline reducing and removing requirements for foreign financial institutions.

Trade Deal Optimism, Brexit Breakthrough Boost European Indexes

Strong stock market performances in the U.S. on Thursday and in Asia early Friday carried over to the European session with its major indexes posting solid gains. The catalysts behind the strength are optimism over U.S.-China trade negotiations with investors hoping for at least a partial deal between the two economic powerhouses and positive developments over Brexit.

At 09:47 GMT, the UK’s FTSE is at 7201.55, up 15.19 or +0.21%. Germany’s DAX is trading 12388.55, up 224.35 or +1.84 and France’s CAC is at 5631.71, up 62.66 or 1.13%.

US-China Relations

Besides the carryover strength from the U.S. and Asia, European shares were boosted by comments from President Trump, who characterized high-level trade discussions between the U.S. and China as “very, very good” and plans to meet with Chinese Vice Premier Liu He at the White House on Friday.

On the back of that comment, Alex Wong, director of asset management at Ample Capital, told CNBC’s “Street Signs” on Friday, “The best scenario probably would be just a partial deal, I think.”

Wong furthered added, “I don’t think we (will) see a very strong outcome today.”

Past meetings between Liu and Trump this year have yielded positive progress on trade. For example, after their meeting in January, China increased its soybean buying. And their February meeting resulted in a delay in tariffs.

Positive Developments over Brexit

European shares were also underpinned after positive comments on Brexit from the leaders of the Republic of Ireland and the U.K.

U.K. Prime Minister Boris Johnson met with his Irish counterpart Leo Varadkar for further Brexit talks Thursday afternoon, with subsequent comments encouraging investors to buy shares.

“The Prime Minister (Johnson) and Taoiseach (Varadkar) have a detailed and constructive discussion,” the joint statement said.

“Both continue to believe that a deal is in everybody’s interest. They agreed that they could see a pathway to a possible deal.”

Additionally, Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October to allow the U.K. to exit the European Union in and orderly manner.

U.K. Brexit secretary Stephen Barclay is in talks with the EU’s chief Brexit negotiator Michel Barnier on Friday.

Finally, J.P. Morgan said Friday it had lifted its outlook for the chances of a Brexit deal from 5% to 50%.

European Equities: A Light Economic Calendar Leaves Geopolitics in Focus

Economic Calendar:

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was a 2nd consecutive day in the green for the majors on Thursday, with the CAC40 rallying by 1.27% to lead the way. The DAX30 and EuroStoxx600 saw more modest gains of 0.58% and 0.65% respectively.

Geopolitics provided support on the day, with news of U.S – China trade talks going into a 2nd day and progress on Brexit supporting the majors.

From Washington, news of Trump planning to meet with China’s Vice Premier He was taken as a positive. On the Brexit front, Johnson and Varadkar also provided support, stating that they see a way to a Brexit deal.

The Stats

It a relatively quiet day on the Eurozone economic calendar on Thursday. Economic data was limited to German trade data for August, which pegged back the DAX30 on the day.

Germany’s trade surplus narrowed from €20.5bn to €18.1bn in August. Economists had forecast a narrowing to €19.4bn.

According to Destatis,

  • Exports fell by 1.8% from the previous month and by 3.9% from the same month a year earlier.
  • Compared with August 2018, exports to the EU fell by 3.3%.
  • Exports to the Eurozone rose by 3.7% in August.
  • Compared with August 2018, the exports of goods to non-EU countries fell by 4.8%
  • Imports rose by 0.5% from the previous month, while falling by 3.1% on the same month a year earlier.
  • Compared with the previous year, imports from the EU fell by 2.7%, while imports from the Eurozone fell by 3.8%.
  • The imports of goods from non-EU countries fell by 3.6%, compared with August 2018.

From the U.S, softer inflation figures had a muted impact on the majors as the markets responded to positive news from Washington and Britain.

The Market Movers

For the DAX: There was further support for the auto sector, with Volkswagen rallying by 2.56% to lead the way. Daimler and BMW weren’t far behind, with gains of 1.92% and 1.09% respectively. Continental trailed with a 0.34% gain. While trade data was negative for the sector, positive updates on trade talks delivered the boost.

Bank stocks also found support, with Deutsche Bank rallying by 2.41% and Commerzbank by 3.85%

From the CAC, it was also a positive day for the banks. Soc Gen led the way, rallying by 3.32%. BNP Paribas and Credit Agricole weren’t far behind, with gains of 2.82% and 2.34% respectively. For the autos, Renault rose by 0.59%, while Peugeot surged by 3.48%.

LVMH led the way on the day, with a 5.56% gain, supported by strong 3rd quarter earnings results.

On the VIX Index

The VIX Index saw red once more on Thursday, falling by 5.74%. Following on from an 8.09% fall on Wednesday, the VIX ended the day at 17.6.

Positive updates from Washington on trade talks ultimately left the VIX in the red at the day end. Hopes of progress on Brexit negotiations also eased market jitters on the day.

VIX 11/10/19 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Finalized September inflation figures are due out of Germany, France, and Spain.

We expect the stats to have a muted impact on the majors, however, with the Brexit and U.S – China trade talks to remain the key drivers.

From the U.S, import and export price index figures will also have a muted impact, while prelim October consumer sentiment figures will have some influence.

In the futures market, at the time of writing, the DAX30 was down by 2 points, while the Dow was up by 45 points.

Futures Fall After Wild Session, EU Flat On Brexit Angst, Asia Rebounds On Trade Hope

The U.S. Futures Are Down After A Volatile Session

The U.S. futures are down after a wild overnight session. The Dow Jones was indicated up by triple digits after an initial report raised hopes for a trade deal. Later in the session, following a string of reports out of China, hopes faded as trade talks are seen stalling. The initial report is that President Trump would allow sales of non-sensitive equipment to Huawei. The later reports say talks have stalled due to a lack of progress. China won’t budge on forced technology transfers and demands the U.S. reverse a decision to blacklist 28 companies earlier this week.

Trade talks are still slated for today in Washington but it is unclear if progress will be made. Vice Premier Liu He is now expected to leave a day early. The Dow Jones Industrial Average is down about -0.20% while the S&P 500 and NASDAQ Composite are both down about -0.15%.

In economic news, the U.S. consumer price index was unchanged over the last month. Economists had been expecting a gain of 0.1%. This news ups the chances for an October rate cut but do little to alter the general outlook. The U.S. economy is still on solid footing.

European Markets Are Flat At Midday

The EU markets are flat and mixed at midday as Brexit angst and trade concerns weigh on sentiment. In Brexit news, negotiations have been delayed by a day and are expected to restart on Friday. The EU has told the UK that significant concessions must be made if there is to be a new deal before the October 31 deadline. The DAX and FTSE are both trading near 0.0% while the CAC is up about 0.25%.

In economic news, UK GDP came in at 0.3% in the last month versus an expected 0.2%. This news, along with a 0.1% upward revision to the previous month, greatly reduces the odds of a 3rd quarter recession. In stock news, shares of biosciences firm Chr. Hansen fell -13% after missing earnings estimates.

Asian Equities Rebound On Trade Hopes

Asian equities rebound on news the U.S. would ease restrictions on Huawei. The major indices closed with gains in the range of 0.0% to 0.78% and closed before reports that sent U.S. markets plunging. The only index to shed value in today’s session is the Korean Kospi, it fell nearly -0.90%. Trading in Korea was impacted by a -2.32% decline in Hyundai Motors. In Japan, factory orders fell for the 2nd month and threaten to extend a manufacturing recession in the country.

European Equities: German Stats, Brexit and Trade Talks in Focus

Economic Calendar:

Thursday, 10th October

  • German Trade Balance (Aug)

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was back in the green for the majors on Wednesday, with the DAX30 rallying by 1.04% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 0.78% and 0.42% respectively.

The trade war pendulum once more swung in favor of the global equity markets. News of China being open to an agreement on the basis that no further tariffs are introduced provided support on the day.

Further tariffs on Chinese goods are due to be rolled out next week and at the end of the year.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday. There were no material stats to provide the European majors with direction on the day.

With economic data from the U.S limited to August JOLTs job openings, geopolitics remained the key driver on the day.

The Market Movers

For the DAX: There was finally some support for the auto sector, with Daimler rallying by 2.5% to lead the way. BMW (+1.09%), Continental (+0.49%), and Volkswagen (+0.97%) also found support from fresh optimism on trade talks.

Bank stocks continued to struggle, however, with Deutsche Bank rising by just 0.16% and Commerzbank falling by 0.15%

Adidas led the way on the day, rallying by 3.26%, with the shift in sentiment towards the U.S – China trade talks delivering the upside.

From the CAC, it was somewhat better for the banks. Soc Gen led the way, rising by 0.48%. BNP Paribas and Credit Agricole saw more modest gains of 0.39% and 0.05% respectively. For the autos, Renault rose by 0.20%, with Peugeot gaining 0.90%.

On the VIX Index

The VIX Index saw red on Wednesday, falling by 8.09%. Partially reversing a 13.55% fall from Tuesday, the VIX ended the day at 18.6.

Yet another shift in sentiment towards today’s resumption of trade talks provided support to the equity markets, to pin back the VIX.

There’s a lot riding on this week’s talks, which leaves the majors exposed to the prospect of heavy falls should trade talks fail to deliver an agreement.

VIX 10/10/19 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German trade data for August is due out ahead of the European open.

Following a mixed set of stats earlier in the week, we can expect the figures to influence going into the open.

With the lingering threat of U.S tariffs on EU goods, Germany’s economy would be hard hit from such an eventuality.

From the U.S, September inflation figures are also due out but will likely have a muted impact on the majors, barring a material pickup in inflationary pressure.

Outside of the stats, expect updates from Brexit and U.S – China trade talks to also influence on the day.

We would expect market sensitivity to the U.S – China trade talks to be greatest over the course of the session.

In the futures market, at the time of writing, the DAX30 was down by 52.5 points, with the Dow down by 169 points.

Futures Surge, China May Accept Interim Trade Deal, Don’t Expect The Trade War To End

The U.S Futures Are Up Sharply In Early Trading

The U.S. futures are up sharply in early trading. Reports from China suggest an interim trade-deal may be at hand. According to separate reports citing an unnamed official China is prepared to accept a partial deal. Their terms are if the U.S does not impose any more tariffs. The reports go on to say China will concede non-core issues but won’t budge on major sticking points.

Chinese officials are said to have “no optimism” regarding a broad trade deal or an end to the trade war. At best, traders can expect a new status quo to be put in place and for economic slowness while businesses adjust. The key takeaway is, however, that a measure of uncertainty may be removed from the market allowing economic expansion to resume.

The NASDAQ Composite is in the lead with a gain of 1.0% in early trading. Shares of Apple’s supply chain are, however, mixed in the premarket session. The S&P 500 is in second place with an advance of 0.90% while the Dow Jones Industrials are up about 0.75%. Later in the session traders will be on the lookout for the JOLTs report and Wholesale Trade at 10 AM.

Europe Up, Brexit Deal Is Still Elusive

European markets are up on trade hope despite the elusiveness of a satisfactory Brexit deal. In the latest news, PM Boris Johnson is facing mutiny from within his own party as the odds of a hard-Brexit increase. An offer from the EU to allow associated parties to exit the Irish-Backstop after a few years was rejected. The rejection by Northern Ireland is understandable but adds to frustrations. Both Johnson and his Irish counterpart have reiterated their desire for a deal.

In stock new, shares of GVC are up nearly 5% after the company increased its earnings guidance for the second time in three months. In other news, markets are expecting another rate cut from the FOMC after a speech by Jerome Powell on Tuesday. Powell says the Fed is prepared to act as necessary and may begin increasing the balance sheet again soon.

Asia Mixed Amid Growing Trade Uncertainty

Asian markets closed the day mixed because the session ended before the reports of China accepting an interim deal hit the wires. Traders in the region are concerned trade relations will not improve due to the U.S. blacklisting of 28 more companies and visa restrictions on official envoys. The U.S. move is in response to China’s alleged human rights violations targeting ethnic Muslims. This move is a counterpoint to China’s harsh backlash against the NBA for supporting the protests in Hong Kong.

The Nikkei is down about -0.60% on weakness in Tencent. The Shanghai advanced 0.39%. The Hang Seng shed -0.81% while the ASX fell -0.71%. The Korean Kospi led today’s session with a gain of 1.21%.

European Equities: No Economic Data Leaves Trade War Chatter in Control

Economic Calendar:

Thursday, 10th October

  • German Trade Balance (Aug)

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was back in the red for the majors on Tuesday, with the CAC40 sliding by 1.18% to lead the way. Things were not much better for the EuroStoxx600 and DAX30, which fell by 1.11% and by 1.05% respectively.

The losses came in spite of better than anticipated economic data out of Germany, with sentiment towards the trade war weighing.

Expectations of progress in trade talks between the U.S and China deteriorated as the markets reacted to news of the U.S including an additional 28 Chinese firms to the blacklist…

To make matters worse, there was some controversy over the ongoing Hong Kong protests. China broadcasters and media suspended the airing of NBA preseason games on Tuesday. The move came in response to the GM of the Houston Rockets, Daryl Morey, tweeting support for the pro-democracy protests.

When considering the fact that China has ramped up the import of U.S agricultural goods, there’s unlikely to be too much give should the U.S stand firm on tariffs, blacklisted companies, and Huawei…

The Stats

It was another quiet day on the Eurozone economic calendar on Tuesday. German industrial production figures for August provided direction in the early part of the day.

According to Destatis,

  • Month-on-month, industrial production rose by 0.3%, reversing a 0.4% fall in July. Economists had forecast a decline of 0.2%.
  • In August, the production of industry excl. energy and construction rose by 0.7%.
  • Within industry, the production of intermediate goods rose by 1% and by 1.1% for the production of capital goods.
  • The production of consumer goods fell by 1.0%, however.
  • Outside of industry, energy production slid by 1.7%, with the production of construction falling 1.5%.
  • Year-on-year, industrial production was down 4%.

From the U.S, wholesale inflation figures for September had a muted impact on the majors late in the day.

The Market Movers

For the DAX: It was yet another bearish day for the auto sector, with BMW (-1.12%), Continental (-0.59%), and Daimler (-0.49%) on the slide.  Volkswagen bucked the trend with a gain of 0.12%.

Bank stocks also struggled on the day, with Deutsche Bank sliding by a further 2.25%. Commerzbank fell by a more modest 1.62%

Leading the way down on the day, however, were Wirecard and Infineon Tech, which tumbled by 4.81% and by 3.59% respectively. The losses came in response to the shift in sentiment towards trade through the day.

From the CAC, it was not much better for the banks. Soc Gen led the way down, sliding by 1.72%. Credit Agricole and BNP Paribas saw more modest losses of 1.55% and 0.68% respectively. For the autos, Renault fell by just by 0.04%, while Peugeot tumbled by 2.81%.

On the VIX Index

The VIX Index saw further upside on Tuesday, rising by 13.55%. Following a 4.81% gain on Monday, the VIX ended the day at 20.3.

Risk aversion hit the majors on Tuesday as the markets reacted to the news from the U.S on the blacklisting of Chinese firms.

Expectations of progress in trade talks had supported the majors going into this week. It’s not the first time that the U.S has made an antagonistic move ahead of trade talks…

VIX 09/10/19 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

From the U.S, JOLT’s job opening figures are due out that could influence should there be a sizeable fall in quit rates. Barring dire quit rates and an unexpected slide in job openings, the numbers are unlikely to impact.

With stats on the lighter side through the day, market sentiment towards the U.S – China trade talks will be key. High-level trade talks are set to resume, but with the U.S administration blacklisting more Chinese companies, China may not be as receptive to U.S demands.

Expect any updates from Washington to have a material influence on risk appetite on the day.

In the futures market, at the time of writing, the DAX30 was 4 points, with the Dow up by 44 points.

U.S. Markets Fall, Hopes For A Trade Deal Fade, BREXIT Talks Close To Failure

The U.S. Futures Moves Lower In Early Trading

The U.S. futures are moving lower in early Tuesday trading after a series of events led traders to believe U.S./China trade negotiations are going nowhere. On the U.S. side of the equation, the White House has expanded its blacklist of Chinese companies by 28. The move is intended to help protect Chinese Muslim minorities that are being persecuted in the country. On the Chinese side of the equation, China’s Sout China Morning Post reports that government officials have toned down their expectations for a deal. Further, Chinese representative Vice Premier Liu He will not carry the Special Envoy title signifying his official status in the talks.

The Dow Jones Industrial Average is in the lead with a loss near -0.29% while the S&P 500 and NASDAQ Composite are close behind. In economic news, September PPI was much weaker than expected and ups the odds for an FOMC rate hike this month. Headline PPI fell by -0.3% during the month leaving the YOY gain at only 2.0%. 2.0% is the Fed’s target rate but with the pace slowing, it is clear the economy is slowing. At the core level, PPI also fell -0.3%.

European Markets Fall As BREXIT News Fails To Soothe Frayed Nerves

European markets are also moving lower on Tuesday due to the downturn in trade hopes. The sentiment was further soured by news the BREXIT talks were close to breaking down. An expectation a solution to the Irish-Backstop had developed over the weekend but that is now dashed. With the BREXIT only three weeks away it is becoming increasingly likely there will not be a smooth transition.

The DAX is in the lead in early trading posting a loss of -1.05% despite better than expected IP numbers. Industrial Production in the EU’s largest economy rose 0.3% versus an expectation of 0.1%. The news suggests that Germany’s broader economy may avoid recession but concerns over slowing remain. The French CAC is also down about -1.05% while the UK FTSE 100 is trailing at -.035%.

Asian Markets Are Broadly Higher

Asian markets are broadly higher despite signs a trade deal between China and the U.S. will remain elusive. The Nikkei leads with a gain of 0.99% while most others advanced 0.25% to 0.45%. Analysts at JP Morgan are certain no deal will be made other than maintaining the current status quo. It is possible Trump will delay or suspend tariffs set to take effect next week but traders are cautioned not to put much hope in that outlook.

European Equities: Economic Data and Trade in Focus

Economic Calendar:

Tuesday, 8th October

  • German Industrial Production (MoM) (Aug)

Thursday, 10th October

  • German Trade Balance (Aug)

Friday, 11th October

  • German CPI (MoM) (Sep) Final
  • French CPI (MoM) (Sep) Final
  • Spanish CPI (YoY) (Sep) Final
  • Spanish HICP (YoY) (Sep) Final

The Majors

It was a bullish start to the week for the European majors. The EuroStoxx600 led the way with a 0.71% gain, with the DAX30 and CAC40 rising by 0.70% and by 0.61% respectively.

The majors found further support from Friday’s U.S labor market figures, which had reported a fall in the U.S unemployment rate to 3.5%.

Economic data out of Germany continued to disappoint, with sentiment towards Brexit and U.S – China trade talks also limiting any upside.

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. German factory order figures for August delivered few surprises in the early part of the day.

According to Destatis,

  • Month-on-month, factory orders fell by 0.6%, following a 2.1% slide from the previous month. Economists had forecast a decline of 0.3%.
  • Domestic orders decreased by 2.6%, while foreign orders increased by 0.9% in August, month-on-month.
  • New orders from the euro area were up by 1.5%, with new orders from other countries rising by 0.4% compared with July-19.
  • Manufacturers of intermediate goods saw new orders increase by 1.1%, while manufacturers of capital goods saw new orders fall by 1.6%.
  • For consumer goods, new orders slipped by 0.9%.
  • Year-on-year, factory orders fell by 6.7% compared with a 5% decline in July.

There were no material stats from the U.S to influence later in the session.

The Market Movers

For the DAX: It was yet another bearish day for the auto sector, with Continental sliding by 2.65%. Daimler (-0.89%), BMW (-0.21%), and Volkswagen (-0.01%) also saw red.

Bank stocks also struggled on the day, with Deutsche Bank sliding by  1.18%. Commerzbank fell by a more modest 0.5%

From the CAC, it was a bullish day for the banks. BNP Paribas led the way, rising by 0.78%. Credit Agricole and Soc Gen saw more modest gains of 0.71% and 0.51% respectively. For the autos, Renault rose by 0.28%, with Peugeot ending the day up by 0.32%.

A divergence in sentiment between Germany and France’s respective economies continued to deliver mixed results for both sectors.

On the VIX Index

The VIX Index rose by 4.81% to end the day at 17.9.

While the European majors found support from the hope that the U.S economy will avoid a recession, Trump chatter weighed on the U.S majors later in the day.

VIX 08/10/19 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. August German industrial production figures are due out ahead of the European open.

Following Monday’s factory order numbers and last week’s private sector PMI numbers, the numbers are unlikely to provide too much support to the DAX.

From the U.S, wholesale inflation figures will likely have a muted impact on the European majors later today, barring an unexpected pickup in inflationary pressures.

Outside of the numbers, we can expect Brexit chatter and sentiment towards the U.S – China trade talks to remain the key drivers on the day.

In the futures market, at the time of writing, the DAX30 was 15.5 points, with the Dow up by 22 points.

Futures Fall In Early Trading, Brexit Deal Is In Focus, Trade Talks To Take Place This Week

The U.S. Market Moves Lower

The U.S. market is moving lower in early Monday trading as caution takes center stage. Traders will be watching a number of key economic releases as well as trade talks slated for Washington D.C. The Dow Jones Industrial Average, the S&P 500, and NASDAQ Composite are all down about -0.25% in the premarket session. The industrial stocks are in the lead, the XLI Industrial SPDR is down about -0.50%.

In economic news, this week’s calendar will bring us CPI and PPI as well as the JOLTs report and FOMC minutes. On the inflation front, traders will be looking for signs of clarity regarding the Fed. The Fed is expected to cut rates later this month but the outlook is cloudy. While activity is slowing and inflation is running cool, the labor markets are still strong. The NFP data reveals underlying strength in the U.S. The FOMC may cut rates one more time before the end of the year but the odds for two are well below 50%.

In trade news, deputy-level talks will be held in Washington this week. China is sending Vice Premier Liu He who has already said China will not agree to the broad reforms President Trump is asking for.

Brexit Deal In Focus, Expect Big News By The End Of The Week

EU markets are slightly higher in early Monday trading as hopes for a smooth Brexit intensify. The UK FTES is in the lead at midday but the gain is small, only about 0.25%, while the DAX and CAC are close behind. In Brexit news, UK PM Boris Johnson’s solution to the Irish-Backstop was met with some optimism. While there is no indication it will be accepted leaders in the EU have embraced it with an open mind. France’s Macron says the EU Council will make its decision by the end of the week.

In economic news, German Industrial Orders fell again and more than expected. The news is the latest indication the German manufacturing recession will continue for another month. On the consumer front, Sentix Consumer Sentiment fell to -16.8 from -11.1 as trade woes and economic slowdown drag on outlook. In stock news, shares of HSBC moved higher after the company said it would cut up to 10,000 jobs in an effort to control costs.

Asia Mixed, Trade Is In Focus

Asia markets are mixed after Monday’s session. The Chinese and Hong Kong markets are still closed for holidays. The session was led by Korea and Australia which gained close to 1.0% and 0.70%. Japan trailed with a loss of -0.16%. Investors are hopeful an interim deal will be reached between the U.S. and China. One trader put the odds at 40% for an interim deal and 60% for the October 31st tariffs to be delayed.