European Equities: Can the Majors Brush Aside the Trade War Angst?

Economic Calendar:

Tuesday, 6th August

  • German Factory Orders (MoM) (Jun)

Wednesday, 7th August

  • German Industrial Production (MoM) (Jun)

Thursday, 8th August

  • ECB Economic Bulletin  

Friday, 9th August

  • German Trade Balance (Jun)
  • Italian CPI (MoM) (Jul) Final

The Majors

The European majors took another hit at the start of the week. Leading the way down was the EuroStoxx600, which fell by 2.31% off the back of last week’s 3.22% slide.

Things weren’t much better for the CAC40 and DAX30, which declined by 2.19% and 1.80% respectively. For the pair, the losses came off the back of 4.48% and 4.41% declines respectively from the week prior.

Asia set the tone early on, with the Chinese Yuan sliding to beyond CNY7.00 against the greenback. Trade war chatter drove risk aversion as news of China ceasing the import of U.S agricultural products hit the wires. There was also chat of China’s plans to withdraw from the U.S – China talks altogether…

The Stats

It was a relatively busy day on the economic data front.

Economic data out of the Eurozone included Spanish and Italian service sector PMI numbers for July. Finalized service sector PMIs out of France, Germany and the Eurozone also influenced.

Italy’s service sector PMI rose from 50.5 to 51.7, which was better than a forecasted rose to 50.6. Spain’s service sector saw slower growth in July, however, with the PMI easing from 53.6 to 52.9.

According to finalized PMI numbers, France’s service PMI came in at 52.6, which was up from a prelim 52.2. Service sector activity did ease, however, from June where the PMI stood at 52.9.

For Germany, the finalized PMI came in at 54.5, which was down from a June 55.8 and prelim 55.4. The mixed results left the Eurozone’s service sector PMI at 53.2, which was down from a prelim 53.3 and June 53.6.

The Eurozone’s Private Sector

According to the Eurozone Composite PMI survey,

  • The Final Output Index came in at 51.5, which was in line with prelim, while down from a June 52.2.
  • Private sector performance continued to diverge, with the service sector continuing to report a solid pace of growth. By contrast, the manufacturing sector saw an accelerated fall in production.
  • The German economy struggled the most, with solid service sector activity being offset by a deteriorating manufacturing sector. Germany’s composite PMI reported the slowest rate of growth in over 6-years.
  • A pickup in growth in Italy led to the composite rising to a 4-month high, while Spain’s composite fell to its weakest in almost 6-years. In spite of a 68-month low, Spain ranked 2nd in July, coming in ahead of Italy in 3rd.
  • France was the best performer, in spite of a subdued rate of expansion across the private sector.
  • For the Eurozone, continued weakness in demand was a drag on private sector performance once more. Whilst seeing a marginal pickup in the service sector, a marked slide in orders from the manufacturing sector weighed.
  • In spite of weaker orders, firms continued to hire, though the pace of hiring was at its weakest since Apr-16.
  • Optimism also deteriorated to its lowest level in just under 5-years, with German companies the least optimistic.

Ahead of the U.S session, the DAX30 was down by 1.27%, with the CAC40 down by 1.75%, the stats doing few favors on the day. The EuroStoxx600 was also deep in the red, sliding by 1.6% in the wake of the PMI numbers.

Out of the U.S

It was a relatively busy day on the economic calendar. The stats included finalized Markit service sector and composite PMIs and the market’s preferred ISM non-manufacturing PMI.

While the Markit Service PMI came in ahead of a prelim 52.2 and June 51.9, the focus was on the preferred ISM survey. According to the July ISM non-manufacturing survey,

  • The PMI fell from 55.1 to 53.7 in July, weighed by a 5.1 percentage point slide in business activity sub-index to 53.1.
  • New orders saw a slower pace of growth, with the sub-index falling from 55.8 to 54.1. The new export orders sub-index also eased back, falling from 55.5 to 53.5.
  • On the positive, employment was on the rise, with the employment index rising from 55.0 to 56.2.
  • 13 non-manufacturing industries reported growth in July, while 5 reported a decrease.

The stats weighed on the European majors, with the EuroStoxx600, DAX30, and CAC40 extending their losses in the U.S session.

The Market Movers

From the DAX, Adidas was the worst performer on the day, sliding by 5.22% ahead of Thursday’s earnings results. From the auto sector, Daimler was the worst performer, falling by 3.37%. BMW (-2.61%), Continental (-2.74%), and Volkswagen (-2.92%) weren’t far behind. Things were not much better for the banking sector, with Deutsche Bank and Commerzbank falling by 3.28% and 2.78% respectively.

From the CAC, Renault was the only stock to end the day in the green, rising by 1.2%. From the banking sector, BNP Paribas led the way down, falling by 1.79%. Credit Agricole and Soc Gen saw more modest losses of 0.77% and 0.09% respectively. On the day, high-end brands LVMH Moet Hennessy Vuitton and Hermes were amongst the biggest losers. LVMH tumbled by 4.23%, with Hermes ending the day down by 3.02%.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Stats out of the Eurozone are limited to Germany’s factory orders for June.

The markets will be looking for a boost to support a pickup in manufacturing sector activity at the turn of the quarter.

From the U.S, June’s JOLTs job openings are unlikely to have a material impact on the European majors later in the day.

Outside of the numbers, any chatter on trade will continue to overshadow the numbers, however.

At the time of writing, the futures were deep in the red. The DAX was down by 215 points, while the Dow Mini was down by just 336 points. An early sell-off came in response to the U.S administration’s tagging of China as a currency manipulator.

European Equities: Service Sector PMIs and Trade in Focus

Economic Calendar:

Monday, 5th August

  • Spanish Services PMI (Jul)
  • Italian Services PMI (Jul)
  • French Services PMI (Jul)
  • German Services PMI (Jul)
  • Eurozone Markit Composite PMI (Jul)
  • Eurozone Services PMI (Jul)

Tuesday, 6th August

  • German Factory Orders (MoM) (Jun)

Wednesday, 7th August

  • German Industrial Production (MoM) (Jun)

Thursday, 8th August

  • ECB Economic Bulletin  

Friday, 9th August

  • German Trade Balance (Jun)
  • Italian CPI (MoM) (Jul) Final

The Majors

The European majors took a tumble on Friday to end the week with heavy losses.

On the day, the CAC40 led the way down, sliding by 3.57%, with the DAX30 and EuroStoxx600 ending the day with 3.11% and 3.26% losses.

Friday’s heavy sell-off left the CAC and DAX down by 4.48% and by 4.41% for the week. The EuroStoxx600 saw a more modest 3.22% loss in the week ending 2nd August.

The losses came in response to Trump’s late Thursday tweets. The U.S President had announced the rollout of fresh tariffs on Chinese goods after the European close on Thursday.

The Stats

It was a relatively quiet day on the economic data front.

Stats included Spanish unemployment change figures and the Eurozone’s June retail sales numbers.

From Spain, unemployment fell by 4.3k, coming up short of a forecasted 21.4k decline. Unemployment had fallen by 63.8k the previous month.

The Eurozone’s retail sales figures failed to provide support early on in the session despite a 1.1% jump in sales, which came in ahead of a forecasted 0.2% rise. Sales had fallen by 0.6% in May.

According to Eurostat,

  • The volume of retail trade increased by 1.6% for automotive fuel, by 1.2% for food, drinks, and tobacco and by 1.1% for non-food products.
  • By member state, Germany recorded the largest increase in retail sales, up by 3.5%, month-on-month.
  • Portugal, Ireland and Slovenia dragged, with declines of 0.9%, 0.8%, and 0.5% respectively.
  • Year-on-year, Eurozone retail sales increased by 2.6%.
  • The volume of retail trade increased by 4.1% for non-food products in June 2019, compared with June 2018.
  • Automotive fuel sales (+1.0%) and food, drinks, and tobacco sales (+0.8%) also provided support.
  • By member state, Lithuania (+5.7%) and Malta (+5.6%) reported the largest increases in total trade volume.
  • Slovakia reported the only decrease, falling by 0.4%.

Out of the U.S

It was a busy day on the economic calendar. The stats failed to provide direction on the day, however, as risk aversion gripped the majors.

Nonfarm payrolls rose by 164k in July, which was in line with forecasts, whilst down on a 193k increase in June. Wage growth impressed, however, picking up from 3.1% to 3.2% year-on-year.

On the trade front, the U.S trade deficit failed to budge, narrowing by just $0.1bn to $55.2bn in June.

The Market Movers

From the DAX, Deutsche Bank was among just a handful of stocks to end the day the green. Leading the way on the DAX, Deutsche Bank rallied by 3.24%. Commerzbank struggled, however, with a 3.98% slide ahead of this week’s earnings release.

It was red for the rest of the pack, with Adidas leading the slide, falling by 4.03% ahead of earnings results due out on Thursday.

From the auto sector, BMW led the way down, with a 2.35% loss. Daimler (-1.2%), Volkswagen (-0.68%), and Continental (-0.38%) also saw red.

From the CAC, it was red across the board for the banking sector. Soc Gen tumbled by 4.6%, reversing most of the previous day’s 5.83% rally that came off the back of better than expected earnings. BNP Paribas and Credit Agricole also saw heavy losses, with the pair sliding by 3.96% and by 4.88% respectively.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Stats out of the Eurozone include Spanish and Italian service sector PMI numbers for July.

While finalized French and German service sector PMIs will likely have a limited impact, the Eurozone’s Composite PMI will also influence on the day.

From the U.S, the market’s preferred ISM non-manufacturing PMI will also provide direction later in the day.

Outside of the numbers, expect market sentiment towards the trade war and the global economic outlook to also influence.

At the time of writing, in the Futures market, the DAX was down by 48 points, while the Dow Mini was down by just 129 points.

European Equities: The Majors Are in for Pain as Trump Signals Fresh Tariffs

Economic Calendar:

Friday, 2nd August

  • Eurozone Retail Sales (MoM) (Jun)

The Majors

The European majors enjoyed a 2nd consecutive day in the green on Thursday. The CAC40 led the way, rising by 0.7%. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 0.53% and 0.50% respectively.

Fortunately for the European majors, the markets had closed ahead of Trump’s latest tariff threats that roiled the U.S majors on the day and the Asian majors this morning.

The Stats

It was a relatively busy day ahead on the economic data front.

Economic data out of the Eurozone included July manufacturing PMI numbers out of Spain and Italy and finalized PMIs out of France, Germany, and the Eurozone.

Spain’s manufacturing PMI increased from 47.9 to 48.2, which was better than a forecasted rise to 48.1. Italy’s manufacturing PMI also improved, rising from 48.4 to 48.5, coming in ahead of a forecasted 48.0.

The upward trend supported the Eurozone’s manufacturing PMI, which was revised upwards from 46.4 to 46.5. The PMI was down from a June 47.6, however. Germany’s manufacturing PMI was also revised upwards from 43.1 to 43.2, while France’s PMI was revised down from 50.0 to 49.7.

According to the Eurozone’s finalized Markit Survey,

  • The Eurozone’s manufacturing sector contracted for a 6th consecutive month in July. At 46.5, the PMI signaled the sharpest deterioration in operating conditions since Dec-12.
  • A sharp fall in new orders weighed, with new orders seeing the 2nd largest decline in just over 6-years.
  • Export trade deteriorated to the greatest degree since Nov-11.
  • Germany’s manufacturing sector recorded its sharpest deterioration in operating conditions for 7-years.
  • Employment was also on the slide, with the rate of job losses the sharpest since May-13.

Out of the U.S

From outside of the Eurozone, the ISM Manufacturing PMI had little impact on the day. According to the latest ISM Manufacturing PMI survey,

  • The July PMI eased back from 51.7 to 51.2, coming in below a forecasted 52.0, with the production index falling from 54.1 to 50.8.
  • While the headline PMI slipped, the new orders sub-index rose from 50.0 to 50.8. In spite of the uptick in the new orders sub-index, the new export orders sub-index contracted in July. The Index fell from 50.5 to 48.1.
  • The employment index also fell back, with a 2.8 percentage point fall to 51.7.

The Market Movers

From the DAX, there was plenty of red, with Siemens leading the way down, falling by 4.85%, with disappointing earnings outlook weighing. From the auto sector, Volkswagen was amongst the worst performers on the day, falling by 1.87%. Continental and Daimler also saw heavy losses, with the pair ending the day down by 1.73% and by 1.68% respectively. BMW managed to buck the trend on the day with a 0.03% gain.

From the banking sector, Deutsche Bank slid by 3.17%, while Commerzbank managed a 0.39% gain on the day.

From the CAC, it was green across the board for the banking sector. Soc Gen rallied by 5.83% off the back of better than expected earnings. BNP Paribas and Credit Agricole gained 1.58% and 0.83% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Stats out of the Eurozone are limited to the Eurozone’s June retail sales figures.

While we can expect the numbers to provide direction, the market focus on the day will be on the U.S labor market numbers due out later in the day.

From the geopolitical front, the latest planned rollout of tariffs on Chinese goods will have a material impact on the day and will likely overshadow the stats. The tariffs are due to be rolled out on 1st September as Trump looks to force China to move more quickly on negotiations. Trump’s Twitter account was in full swing and the U.S President threatened even heavier tariffs if trade negotiations fail to make progress.

At the time of writing, the DAX was down by 230.5 points, while the Dow Mini was down by just 18 points.

European Equities: The FED Rate Cut and Stats to Provide Direction

Economic Calendar:

Thursday, 1st August

  • Spanish Manufacturing PMI (Jul)
  • Italian Manufacturing PMI (Jul)
  • French Manufacturing PMI (Jul) Final
  • German Manufacturing PMI (Jul) Final
  • Eurozone Manufacturing PMI (Jul) Final

Friday, 2nd August

  • Eurozone Retail Sales (MoM) (Jun)

The Majors

The European majors closed out the last day of the month in the green, with the DAX30 leading the way, rising by 0.34%. The CAC40 and EuroStoxx600 saw more modest gains of 0.14% and 0.17% respectively.

A bearish week left the majors mixed for July, with the DAX and CAC falling by 1.69% and by 0.36% respectively in the month. The EuroStoxx600 bucked the trend, rising by 0.23% in spite of a 1.27% loss for the current week.

The moves on the day came ahead of the FED’s interest rate decision that caught the U.S markets off guard later in the day. A hawkish rate cut led to the last day of the month fall in the U.S majors.

The Stats

Out of France

According to Insee,

Consumer prices rose by 0.2%, month-on-month, which was worse than a forecasted 0.3%. Prices rose by 0.3% in June. Baseline consumer prices fell by 0.2% in July, month-on-month, which was in line with forecast. The Harmonized Index for Consumer prices had risen by 0.3% in June.

Out of Germany

According to Destatis, retail sales jumped by 3.5% in June, which was well ahead of a forecasted 0.5% rise. Sales had fallen by 0.6% in May.

Germany’s unemployment rate held steady at 5% in July, which was in line with forecast. According to Destatis,

  • Unemployment increased by 1K, which was better than a forecasted 2K rise. Unemployment had fallen by 1K in June.

Out of the Eurozone

According to Eurostat:

The Eurozone economy grew by 1.1% in the 2nd quarter, following a 1.2% rise in the 1st. Economists had forecast a 1.0% year-on-year growth. Quarter-on-quarter, the economy grew by 0.2%, following 0.4% growth in the 1st quarter. Economists had forecast 0.2% growth.

On the labor market front, the Eurozone’s unemployment rate slipped from a revised 7.6% to 7.5% in June. Economists had forecast the unemployment rate to come in at 7.5%.

On the inflation front, the Eurozone’s July annual rate of core inflation came in at 0.9%, easing from 1.1% in June, according to prelim figures. The Eurozone’s annual rate of inflation came in at 1.1%, easing from 1.3% in June.

Out of the U.S

From outside of the Eurozone, economic data out of the U.S was also of influence on the day. ADP nonfarm employment rose by 156K in July, which was better than a forecasted 150K rise. In June, nonfarm employment rose by an upwardly revised 112K.

On the monetary policy front, the FED cut interest rates by 25 basis points, as had been forecasted. A less dovish than anticipated FED Chair weighed on the U.S majors while fuelling a Greenback rally in response. The European markets were closed at the time of the FED interest rate decision.

The Market Movers

From the DAX, the auto sector saw red on Wednesday, with Continental and Daimler falling by 1.14% and by 0.96% respectively. BMW and Volkswagen saw more modest losses of 0.88% and 0.45% respectively. From the banking sector, Deutsche Bank was amongst the best performers, rallying by 2.37%. Commerzbank bucked the trend, however, falling by 0.13% on the day.

From the CAC, it was also a bullish end to the month for bank stocks. BNP Paribas and Credit Agricole rose by 1.59% and by 1.27% respectively. Soc Gen saw a more modest gain of 0.68%. Renault joined the German autos in the red, falling by 0.63%.

The Day Ahead

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

Economic data due out of the Eurozone include July manufacturing PMI numbers out of Spain and Italy. While finalized manufacturing PMIs out of France and Germany will unlikely have an influence, the Eurozone’s manufacturing PMI will also have an impact on the day.

While the stats will provide direction, we can expect the majors to respond to the FED’s interest rate cut and the FOMC rate statement.

Out of the U.S, the market’s preferred ISM manufacturing PMI will also have an impact on the majors.

On the corporate earnings front, BMW, Infineon Technologies AG, and Siemens AG will also have an impact on the day.

At the time of writing, the DAX futures was down by 20 points, while the Dow Mini was down by 6 points.

European Equities: Trade, Corporate Earnings and Stats in Focus

Economic Calendar:

Tuesday, 30th July

  • French GDP (QoQ) (Q2)
  • GfK German Consumer Climate (Aug)
  • French Consumer Spending (MoM) (Jun)
  • German CPI (MoM) (Jul) Prelim

Wednesday, 31st July

  • German Retail Sales MoM (Jun)
  • French CPI m/m (Jul) Prelim
  • French HICP m/m (Jul) Prelim
  • Spanish GDP (QoQ) (Q2)
  • German Unemployment Change (Jul)
  • German Unemployment Rate (Jul)
  • Eurozone Core CPI (YoY) (Jul) Prelim
  • Eurozone CPI (YoY) (Jul) Prelim
  • Italian CPI (MoM) (Jul) Prelim
  • Eurozone GDP (Q2)
  • Eurozone Unemployment Rate (Jun)

Thursday,1st August

  • Spanish Manufacturing PMI (Jul)
  • Italian Manufacturing PMI (Jul)
  • French Manufacturing PMI (Jul) Final
  • German Manufacturing PMI (Jul) Final
  • Eurozone Manufacturing PMI (Jul) Final

Friday, 2nd August

  • Eurozone Retail Sales (MoM) (Jun)

The Majors

The majors started the week mixed on Monday. The CAC40 and DAX30 fell by 0.16% and by 0.02% respectively, while the EuroStoxx600 rose by 0.03%.

Sentiment towards the U.S – China trade talks that resume today provided support for the majors on the day. With economic data on the lighter side, the outlook towards the FED’s interest rate decision also was a factor ahead of Wednesday’s FOMC.

The Stats

It was a relatively quiet day on the economic calendar, with stats out of the Eurozone limited to Spain’s prelim July inflation figures.

According to Ine, the annual rate of inflation stood at 0.5% in July, falling short of a forecasted 0.6%. The annual rate of inflation had stood at 0.4% in June. The baseline annual rate of inflation stood at 0.7%, up from 0.6% in June. Economists had forecast 0.8%.

Whilst inflationary pressure picked up in July, according to the prelim figures, there’s unlikely to be any shift in the ECB’s stance on monetary policy.

The Market Movers

From the DAX, the auto sector struggled at the start of the week. Volkswagen led the way down on the day, sliding by 1.67%. BMW (-0.76%), Continental (-0.36%), and Daimler (-0.17%) also saw red.

The banking sector also hit reverse on the day, with Deutsche Bank and Commerzbank falling by 0.98% and by 0.56% respectively.

From the CAC, it was also a day in the red for bank stocks. BNP Paribas and Credit Agricole fell by 0.65% and by 0.41% respectively. Soc Gen also declined, falling by 0.76%. Renault joined its German peers, falling by 1.01% on Monday.

The Day Ahead

It’s a busier day ahead on the economic data front.

French 2nd quarter GDP and Germany’s August GfK Consumer Climate figures are due out ahead of the European open.

Later in the morning, French consumer spending figures will also influence the majors. In the afternoon, prelim inflation numbers out of Germany will likely have a muted impact on the majors. We would also expect finalized Eurozone consumer confidence figures to be brushed aside, barring a revision from prelims.

With the ECB tracking consumer spending and labor market conditions, consumer sentiment and spending are key. On the Frech GDP front, anything in line with or better than forecast would also support the majors early on in the day. The French economy is forecasted to grow by 1.3% year-on-year in the 2nd quarter, up from 1.2% in the 1st quarter.

From outside of the Eurozone, economic data out of the U.S will also influence on the day. The FED’s preferred inflation numbers, personal spending, and consumer confidence could have an impact on the FOMC’s forward guidance tomorrow.

Outside of the stats, it’s also a busy day on the corporate earnings front. Facebook, Apple, and General Electric are among key earnings releases late in the day.

At the time of writing, the DAX Futures was up by 8 points, while the Dow Mini was up by 35 points.

Navigating a Massive Week of Event Risks

We get the chance to marry speculation with fact. In fact, we don’t just get answers towards Fed policy, but event risk comes at us hard this week from many geographies, so it’s a case of keeping your friends close and your stops closer.

US event risk

Core PCE inflation (Tuesday 22:30aest) – expected to rise 10bp to 1.7%.

• FOMC meeting (Thursday 4 am) follow by Powell’s press conference (04:030aest) – a 25bp cut is fully priced, with 17% implied probability of 50bp.

• ISM manufacturing (2 am Friday). Expected to improve to 52 on the index

• US non-farm payrolls (22:30aest Friday) – Consensus eyeing 169,000 jobs created in July (224,000 in June), with the unemployment rate to remain at 3.7%. Average hourly earnings expected at 3.1%.

It’s all about the Fed meeting though, and the base-case is they cut 25bp and offer a view they will keep the economic expansion going. With 2.6 hikes priced in through 2019, when they do cut this week the outlook needs to install a firm belief they will go again, or we will see a decent sell-off in rates and Treasuries, and the USDX will move into the top of its multi-month range of 98.0. A move in EURUSD through 1.1100 would look very interesting, and this will no doubt bring out a tweetstorm from Trump, who has seemingly taken it upon himself to defend 1.1100.

Will we see a buy the rumour, sell the fact play out?

The key question in equities is whether we get a classic buy the rumour, sell the fact scenario playing out notably in equities. The key to that will be how US Treasury’s 2s and 5s trade, where if we see higher bond yields, equities should trade lower (and vice versa), and we can see in the Dow that price is consolidating here, and needs to be inspired to push through 27,400. The bears will want to see a break of 27,030 to confirm that the sell on fact is play out, and that would go some way to highlight disappointment.

I expect gold to be well traded, with the yellow metal tracking the fortunes of the US bond market, especially ‘real’ (or inflation-adjusted) yields.

Obviously, if we don’t see a cut, then the USD will spike higher, and equities will get taken to the woodshed. The market will take the Fed to town, as will Trump…

US Q2 corporate earnings

We’ve seen 44% of US corporate report numbers so far, with 77.5% beating on earnings, by an average of 5.3%, with 59% beating on the sales line. Aggregate EPS has grown 4.25% so far, so it’s not been a terrible earnings season, but it’s the macro that dominates this week and how the market responds to the Fed’s outlook. I’ve included a list of the names I would expect to get attention from clients, but its Apple should get the lion’s share of attention.

Consider Apple have beaten EPS and sales in their last eight consecutive quarters, with shares rallying (on average) by 3.38% on the day of release. The implied move on the day of earnings sits at 3.9%, so traders are expecting the stock to have some volatility.

Europe

I was surprised at the disappointment to last week’s ECB meeting, but it seems the lack of urgency to ease at the July meeting was the key consideration here. What I heard re-enforces the view the bank will cut again on 12 September, a fate the market ascribes a 78% probability. We also feel the ECB will announce a framework for renewed asset purchases (QE). My short EURAUD trade was hurt in the process, and I take that off the table for a loss. That said, I would be looking this week at EURJPY downside, which works as a hedge against central bank disappointment this week and tactically running EUR shorts through August seems logical.

On the docket this week we get EZ economic sentiment, German retail sales and unemployment and EZ GDP and CPI.

UK event risk

It’s all about Brexit in the UK now, with the prospect of a general election in late Q4/early Q1 rising by the day. Certainly, Boris Johnson would welcome the Tories rise seen in the weekend polls, and that he is winning over Brexit Party support. Much has been made of his pro-Brexit cabinet, including the appointment of Dominic Cummings, the Campaign Director for the ‘Vote Leave’ campaign, who has been tasked, by Johnson, to deliver Brexit “by any means” and it is a powerful statement to the EU.

As we can see below, GBP implied vols are on the rise, as traders see the possibility of bigger moves in price, so please do consider that when considering position sizing. If I were to hold GBP exposure, it would be in a smaller size than say AUDUSD.

  • BoE meeting (Thursday 9pm aest)

Thursday’s BoE meeting is about setting the scene and how they may deal with the economic fallout of a no-deal Brexit. The market ascribes a 1.7% chance of a cut at this week’s meeting, but it’s about the outlook and whether the bank layout a cut this year. Expect dovish commentary, which should keep the pressure on the GBP, although if I look at the set-up on GBPUSD, there are some optimistic signs, with bullish divergence and a wedge pattern on the daily.

Australia

After governor Lowe suggested the bank are open at another cut this year, the market has brought forward its assumptions for further easing, with the implied probability of a cut in September priced at 54%, and November at 80%. Of course, the ASX200 likes this backdrop and is eyeing a break of the 6851 all-time high, with investors gearing up for our own earnings season.

Should the market be disappointed by the Fed, then we should also see the AUDUSD re-test the recent lows around 0.6864. We can see 1-week implied volatility in AUDUSD is in the 38 percentile, and the implied weekly move of 61-pips takes the price to 0.6851, which marries nicely with the lower Bollinger band, so I’d expect some support to kick in here. Aside from the global factors, keep an eye on:

• Aus Q2 CPI (due Wednesday 11:30aest). The market expects headline CPI to push up 20bp to 1.5%, while core CPI is expected to ease to 1.5% (from 1.6%). The market will be more sensitive to weak inflation numbers than stronger, even if the market is already short AUDs.

China

• July manufacturing PMI (Wednesday at 11:00aest) – Consensus sits at 49.6, up from 49.4 in June

• Non-manufacturing PMI (also Wed) – 54.0 from 54.2

• Caixin manufacturing PMI (Thursday 11:45aest) – 49.6 from 49.4

Implied volatility

Implied volatility is, as the name entails, forward-looking and a view of trader’s perceived future movement in an instruments price over a pre-defined period. So, rather than looking at what has happened and what is effectively fact, we can assess how the market interprets the known event risk in the period ahead and how it will affect the price and to what extent it will likely move. That can be incredibly powerful for assessing how much risk to take in each position, and subsequently, our position size.

It is important to understand that we should only use the implied move as a statistical guide, and one should still look at key technical levels to work a stop loss. As at its core, the bigger the implied move, the wider the suggested stop loss and the smaller the position size. And vice versa.

With all the event risk in play, I have looked at the expected moves in the major currency pairs, based on straddle and strangle pricing. I will be sending a link to a webinar I plan to do on 10 August, if you’re interested in using this framework feel free to sign up.

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Chris Weston, Head of Research at Pepperstone.

 (Read Our Pepperstone Review)

European Equities: U.S China Trade Talks in Focus

Economic Calendar:

Monday, 29th July

  • Spanish HICP (YoY) (Jul) Prelim
  • Spanish CPI (YoY) (Jul) Prelim

Tuesday, 30th July

  • French GDP (QoQ) (Q2)
  • GfK German Consumer Climate (Aug)
  • French Consumer Spending (MoM) (Jun)
  • German CPI (MoM) (Jul) Prelim

Wednesday, 31st July

  • German Retail Sales MoM (Jun)
  • French CPI m/m (Jul) Prelim
  • French HICP m/m (Jul) Prelim
  • Spanish GDP (QoQ) (Q2)
  • German Unemployment Change (Jul)
  • German Unemployment Rate (Jul)
  • Italian CPI (MoM) (Jul) Prelim
  • Eurozone Core CPI (YoY) (Jul) Prelim
  • Eurozone CPI (YoY) (Jul) Prelim
  • Italian CPI (MoM) (Jul) Prelim
  • Eurozone GDP 2nd Estimate
  • Eurozone Unemployment Rate (Jun)

Thursday,1st August

  • Spanish Manufacturing PMI (Jul)
  • Italian Manufacturing PMI (Jul)
  • French Manufacturing PMI (Jul) Final
  • German Manufacturing PMI (Jul) Final
  • Eurozone Manufacturing PMI (Jul) Final

Friday, 2nd August

  • Eurozone Retail Sales (MoM) (Jun)

The Majors

The European majors ended the week on a high note on Friday. The CAC40 led the way on Friday, rising by 0.57%, closely followed by the DAX30, which rose by 0.47%. The EuroStoxx600 trailed the pair with a gain of just 0.31%.

For the week, the DAX30 led the way, gaining 1.3%. The CAC40 and EuroStoxx600 also made ground on the week, rising by 1.04% and by 0.90% respectively.

The Stats

It was a quiet day on the economic calendar, with no material stats out of the Eurozone at the end of the week

From the U.S, 2nd estimate, 2nd quarter GDP numbers came in ahead of market forecasts, providing support to the majors.

The U.S economy grew by 2.1% according to 2nd estimate figures, coming in ahead of a forecast 1.9% growth rate for the quarter. This was down from a 1st estimate 3.1%, however.

Outside of the stats, the European majors continued to find support from the Thursday’s ECB monetary policy decision. While the ECB held rates unchanged, the ECB policy statement revealed a willingness to ease monetary policy. Draghi’s less pessimistic view on the economy was also positive. While citing concerns over trade and manufacturing, Draghi expects consumption to continue to support the economy.

As far as the markets are concerned, an assurance that the ECB will make a move should economic conditions deteriorate was good enough.

The Market Movers

From the DAX, Volkswagen was amongst the top performers on the day, rising by 1.13%. It wasn’t all plane sailing for the auto sector, however, with Continental sliding by 0.98%. BMW and Daimler joined Volkswagen in the green, with gains of 0.17% and 0.28% respectively.

It was also a mixed bag for the banking sector. While Deutsche Bank ended the day flat on the day, Commerzbank fell by 0.66%.

From the CAC, it was also a mixed day for bank stocks. BNP Paribas and Credit Agricole fell by 0.13% and by 0.45% respectively. Soc Gen bucked the trend, rising by 0.39%. Renault found support, rising by 0.25% on Friday.

The Day Ahead

It’s a relatively quiet day on the economic calendar, with Spain’s prelim July inflation figures due out later this morning.

Barring an unexpected acceleration in the annual rate of inflation, the stats are unlikely to have a material impact on the majors.

With the stats on the lighter side, the markets will be looking for updates from the U.S – China trade talks that resumed this morning.

Sentiment towards monetary policy will also influence, with the BoJ, the FED and the BoE in action this week.

On the geopolitical front, Iran will also be in focus as tensions rise between Iran and the West.

At the time of writing, the DAX was down by 20 points, while the Dow Mini was down by 26 points.

European Equities: Corporate Earnings, Trade and U.S Stats in Focus

The Majors

The European majors saw red on Thursday, with the DAX leading the way down on the day, sliding by 1.28%. The CAC40 and EuroStoxx600 also saw red, with the pair falling by 0.50% and 0.56% respectively.

A combination of disappointing economic data out of Germany and a less dovish than hoped Draghi press conference weighed. Some market participants had also priced in a rate cut for Thursday, which wasn’t forthcoming.

The Stats

Key stats out of the Eurozone on Thursday included Germany’s IFO Business Sentiment numbers and jobseeker figures out of France.

According to the July IFO survey,

  • The Business Climate Index fell from 97.5 to 95.7 in July.
  • Also deteriorating was sentiment towards current conditions and business outlook.
  • The IFO Current Assessment Index fell from 101.1 to 99.4, with the Business Expectations Index falling from 94 to 92.2.
  • In the manufacturing sector, the business climate index saw its largest fall since Feb-09. The current situation index tumbled, with firms also being more pessimistic about the next 6-months.
  • The services sector business climate index also declined, falling from 20.3 to 17.7. Sentiment towards current conditions weighed, though firms were also pessimistic for the first time since 2009.
  • Things were quite dire in trade, where the business climate index tumbled from 7.9 to 1.4.
  • Bucking the trend in July, the construction sector’s business climate index rose from 23 to 23.3. The increase was supported by a more optimistic outlook, as construction companies had a more negative assessment over current conditions.

The ECB

With the markets brushing aside the jobseeker numbers out of France, the focus then shifted to the ECB monetary policy decision and press conference.

The ECB monetary policy statement talked of rates holding at current or lower levels at least through the first half of 2020. Some market participants had anticipated a rate hike on Thursday.

While the minutes talked of further possible monetary policy easing, Draghi was less forthcoming at the ECB press conference, which weighed on the European majors. Draghi talked of high employment, household wealth and wage growth sitting at long-run average levels, which are all supportive of consumption.

From the U.S, June durable goods orders numbers, trade data, and the initial jobless claims were of little influence in spite of some positive numbers.

Corporate Earnings

On the corporate earnings front, Volkswagen released earnings results on Thursday, which were positive but not enough prevent a sell-off. The sell-off came in spite of 2nd quarter operating profits rising by 30%

Negative sentiment towards a shrinking auto sector weighed, with Wednesday’s manufacturing PMI numbers having also highlighted weak demand for autos.

The Market Movers

From the DAX, the auto sector led the way down. Volkswagen and Daimler slid by 3.34% and by 2.64% respectively. BMW and Continental also hit reverse, with the pair falling by 1.96% and by 0.69% respectively.

Bank stocks fared better on the day, with Deutsche Bank and Commerzbank rising by 0.17% and by 1.02% respectively.

From the CAC, it was a mixed day for the bank stocks. BNP Paribas and Credit Agricole rose by 0.14% and by 0.09% respectively. Soc Gen bucked the trend, falling by 0.76%. Renault also struggled, falling by 1.66% on Thursday.

The Day Ahead

It’s a quiet day on the economic calendar. With no material stats due out of the Eurozone, the focus will be on corporate earnings and U.S GDP numbers due out later in the day.

Outside of the stats, any chatter ahead of Monday’s resumption of trade talks will also be of influence.

At the time of writing, the DAX was up by 16.5 points, while the Dow Mini was up by 51 points.

ALPHABET – Watch the Revenue Numbers – Q2 Earnings later today

The Cloud is King

Over the last 2 years, Alphabet has beaten EPS estimates 75% of the time and revenue estimates 100% of the time. Zack Investments report that Alphabet’s search market share (north of 90%) is a big positive, which along with its focus on innovation of its AI techniques, strategic acquisitions and Android OS should continue to generate strong cash flows for the company. Moreover, the growing momentum of Google Cloud and expanding data centres will continue to bolster the company’s presence in the cloud space.

From the negative perspective though, Alphabet is facing some downwards risks, as with Q42018 and Q12019, it invested heavily on digital advertising and on opening data centres to extend its cloud footprint worldwide and for designing, developing and marketing the new range of Pixel phones. Growth in advertising revenues will also be under the spotlight later. The revenue growth in Q1 was under 20% (the first time in over 3 years) at 16.7% and the key revenues from advertising were down 15.6%, representing a two-year lows. On top of this was the announcement earlier in the week, from the Department of Justice that the US Attorney General, William Barr, was interested in launching a broad antitrust investigation into the Big Tech companies within the USA- the sort of scrutiny that has brought successful anti-trust actions in the past in other jurisdictions, notably from the EU.

So what does Q2 hold?

In general, Alphabet is expecting revenues to be just shy of $31.00 billion at $30,90 with a consensus earnings per share coming in at $11.49 for a decline of 2% However, Alphabet has a history of beating estimates by more than 10% on average, so could Q2 prove to be the same? The Cloud business continues to grow significantly following the huge invest from Q42018, some analysts polled by Reuters are expecting the business unit to be worth between $17 and $20 billion by Q42020. However, it is a very competitive space with Amazon, IBM and Microsoft, all key players and with larger market shares than Alphabet. The investment needs to continue.

Technically, Alphabet shares are up 9% year to date, under performing peers and the wider USA500 in general. The chart is very mixed although Analysts remain biased to the upside with 38 of 43 having a BUY or STRONG BUY rating for the stock, with targets ranging from $1,150 to $1,500.

The Pivot zone is the confluence of the 200, 50 and 20-day moving averages at $1130. Below this level $1100 provides short-term support with the lower Bollinger band at $1075. Resistance sits initially at $1160, the upper Bollinger band at $1180 and $1190.

The Alphabet numbers are released at 20:00 GMT later today, and all eyes will be on the revenue numbers and the growth of Google Cloud.

 

Stuart Cowell, Head Market Analyst at HotForex
(read our HotForex Review)

European Equities: Corporate Earnings, Stats and the ECB in Focus

Economic Calendar:

Thursday, 25th July

  • German IFO Business Expectations, Current Assessment, and Climate Indexes
  • French Jobseekers Total
  • ECB Monetary Policy Statement (Jul)
  • ECB Press Conference

The Majors

The European majors ended the day mixed on Wednesday. The DAX and EuroStoxx600 ended the day in the green, with gains of 0.26% and 0.05%, while the CAC40 fell by 0.22%.

Gains for the DAX and EuroStoxx600 came in spite of weak economic data released on the day. Corporate earnings out of Germany also failed to impress, with Deutsche Bank releasing a worse than forecast set of numbers.

Monetary policy ruled the day as the markets continued to price in further easing by the ECB later today and by the FED next week.

The Stats

Key stats out of the Eurozone on Wednesday included July prelim private sector PMI numbers for France, Germany, and the Eurozone.

According to the latest Markit Surveys, Germany’s manufacturing PMI fell from 45.0 to 43.1, the lowest level in 84-months. According to the latest composite survey,

  • Manufacturing output saw one of its most marked contractions since 2009. New orders, employment and stocks of purchases slid at a faster pace.
  • Manufacturing sector employment saw the most marked fall in payrolls in 7-years.
  • Factory export orders saw the sharpest fall in over 10-years, attributed to weaker demand from China and for autos.
  • Confidence amongst manufacturers towards future output sank to its lowest level since late 2012.
  • The service sector PMI fell from 55.8 to 55.4, with services companies seeing their weakest optimist since Dec-14.

Things were not much better for France. The manufacturing sector stalled in July, with the PMI falling from 51.9 to 50.0. The service sector PMI also disappointed, falling from 52.9 to 52.2, according to prelim figures.

For the Eurozone, the July composite PMI came in at 51.5, down from 52.2. The manufacturing PMI slid from 47.6 to 46.4, with the services sector PMI falling from 53.6 to 53.3.

According to the latest Eurozone Composite PMI,

  • The Eurozone’s manufacturing PMI Output Index fell from 47.5 to 47.0, a 75-month low, with the manufacturing PMI sitting at a 79-month low.
  • Overall inflows of new work almost stagnated and business sentiment fell to its lowest level since late 2014.
  • The manufacturing sector reported the largest drop in productivity since April 2013. Manufacturers also reported the 2nd largest drop in new orders since 2012. Goods exports fell at the steepest rate since November 2011.

From the U.S, the July Composite PMI increased from 51.5 to 51.6. The upside came off the back of a pickup in service sector activity that more than offset stagnation in the manufacturing sector. According to the latest Markit PMI survey,

  • The U.S Composite Output Index rose from 51.5 to a 3-month high 51.6, supported by an increase in the services business activity index. The index rose from 51.5 to a 3-month high 52.2.
  • In the manufacturing sector, the PMI fell from 50.6 to a 118-month low 50.0. The Manufacturing Output Index fell from 51.2 to a 119-month low 48.9.

The Market Movers

From the DAX, the auto sector was amongst the best performers on the day. Volkswagen led the way with a 0.83% gain, closely followed by Continental, which rose by 0.46%. BMW and Daimler also saw green, rising by 0.37% and 0.33% respectively.

Disappointing earnings results weighed on Deutsche Bank, which fell by 0.62% on the day. Commerzbank managed a 0.39% rise.

From the CAC, BNP Paribas eked out a 0.01% gain, while Soc Gen and Credit Agricole rose by 0.59% and by 0.18% respectively. Renault also found support on the day, rising by 1.1% on Friday.

The Day Ahead

It’s a relatively busy day on the economic calendar. July IFO Business Climate Index numbers are due out of Germany early on. In the early afternoon, France’s jobseeker figures are also due out, though will unlikely have a material impact.

Germany’s IFO numbers will provide the majors with direction ahead of the ECB monetary policy decision and press conference.

The markets will be looking for further easing ahead of the ECB press conference. It may ultimately boil down to Draghi on the day. A cut in rates and assurances of further action if needed would be a positive for the majors.

There will also be corporate earnings to consider on the day, with earnings from both Germany and the U.S in the spotlight.

At the time of writing, the DAX was up by 57.5 points, while the Dow Mini was up by 51 points.

European Equities: Private Sector PMIs and Corporate Earnings in Focus

Economic Calendar:

Wednesday, 24th July

  • German PPI m/m(Jun)
  • French Manufacturing PMI (Jul) Prelim
  • French Services PMI (Jul) Prelim
  • German Manufacturing PMI (Jul) Prelim
  • German Services PMI (Jul) Prelim
  • Eurozone Manufacturing PMI (Jul) Prelim
  • Eurozone Markit Composite PMI (Jul) Prelim
  • Eurozone Services PMI (Jul) Prelim

Thursday, 25th July

  • German IFO Business Expectations, Current Assessment, and Climate Indexes
  • French Jobseekers Total
  • ECB Monetary Policy Statement (Jul)
  • ECB Press Conference

The Majors

The European majors were on the move on Tuesday, with the DAX leading the way, rallying by 1.64%. The CAC40 and EuroStoxx600 also saw solid gains, with the pair rising by 0.92% and 0.98% respectively.

With a lack of economic data out of the Eurozone and economic data out of the U.S on the lighter side, corporate earnings provided direction on the day.

There was also support from expectations of an ECB rate cut on Thursday ahead of the FED’s anticipated rate cut next week.

On the geopolitical front, a Boris Johnson victory in the UK leadership race failed to dampen the mood. On the U.S – China trade front, news of face to face meetings scheduled for next week was also positive for the majors.

The Stats

There were no material stats out the Eurozone for a second consecutive day, with U.S stats having a muted impact on the majors.

The Market Movers

From the DAX, the auto sector saw solid gains on Tuesday. Continental led the way, rallying by 9.39%. Daimler (+5.04%), BMW (+4.51%), and Volkswagen (+3.87%) were not far behind as the 4 auto stocks outperformed the rest of the DAX members.

Positive earnings results from UBS provided support to the banking sector. Deutsche Bank ended the day up by 2.87%, with Commerzbank up by 3.84%.

From the CAC, BNP Paribas gained 2.21%, with Soc Gen and Credit Agricole ended the day up by 3.13% and 1.94% respectively. Renault also had a solid day, rising by 2.53%.

The Day Ahead

It’s a busy day on the economic calendar, with France, Germany, and the Eurozone’s prelim July private sector PMIs due out.

We can expect the majors to be particularly sensitive to today’s figures. At a minimum, the rate of contraction in Germany’s manufacturing sector will need to slow. The Eurozone Composite PMI will also need to hold steady to provide support.

From the U.S, prelim July private sector PMI numbers will also be of influence on the day. Weak numbers would support the more dovish members of the FED ahead of next week’s interest rate decision.

On the earnings front, it’s a relatively busy day ahead. From the DAX, Daimler will deliver its earnings results for the quarter. From the U.S, Ford and Tesla will also influence the European auto sector.

At the time of writing, the DAX was up by 32.5 points, while the Dow Mini was up by 20 points.

European Equities: Geopolitics and Corporate Earnings in Focus

Economic Calendar:

Wednesday, 24th July

  • German PPI m/m(Jun)
  • French Manufacturing PMI (Jul) Prelim
  • French Services PMI (Jul) Prelim
  • German Manufacturing PMI (Jul) Prelim
  • German Services PMI (Jul) Prelim
  • Eurozone Manufacturing PMI (Jul) Prelim
  • Eurozone Markit Composite PMI (Jul) Prelim
  • Eurozone Services PMI (Jul) Prelim

Thursday, 25th July

  • German IFO Business Expectations, Current Assessment, and Climate Indexes
  • French Jobseekers Total
  • ECB Monetary Policy Statement (Jul)
  • ECB Press Conference

The Majors

The European majors started the week on the rise, with the CAC40 leading the way on the day, gaining by 0.26%. The DAX30 and EuroStoxx600 weren’t far behind, with the pair up by 0.24% and 0.13% respectively.

With a lack of economic data out of the Eurozone or the U.S on the day, it was sentiment towards corporate earnings and monetary policy that provided direction on the day.

On the geopolitical front, while there were no major updates from trade talks, news of a planned face to face meeting was positive for the majors. The reality remains, however, that trade talks are likely to drag on.

The Stats

There were no material stats out the Eurozone or the U.S to influence on the day.

The Market Movers

From the DAX, it was a mixed bag for the auto sector. Daimler rallied by 1.37% on the day, with BMW ending the day up by 0.17%. Continental bucked the trend on the day falling by 1.75%, while Volkswagen ended the day flat. Continental suffered following a cut to its 2019 outlook on Monday.

It was also a mixed day for the banks. Deutsche Bank rose by 0.51%, while Commerzbank fell by 0.23%.

From the CAC, it was also mixed for the banks. Soc Gen slipped by 0.18%, while Credit Agricole gained 0.19%. BNP Paribas ended the day flat. Renault found support, rising by 0.45%.

The Day Ahead

It’s another quiet day on the economic calendar, leaving corporate earnings to provide direction, along with geopolitical risk.

The U.S – China trade talks and tension in the Middle East will be in focus. There will also be the announcement of the new British PM, who could be on the cusp of dragging Britain of the EU without a deal. On the corporate earnings front, the focus will be on U.S earnings results later in the day.

With the July FOMC meeting approaching, the FOMC blackout period started on Saturday, preventing any further FOMC member chatter. While the markets will continue to bet on a July rate hike, the big debate is how large a cut the FED will deliver.

At the time of writing, the DAX was up by 77.5 points, while the Dow Mini was up by 35 points.

European Equities: Geopolitical Risk to Influence the Majors

Economic Calendar:

Wednesday, 24th July

  • German PPI m/m(Jun)
  • French Manufacturing PMI (Jul) Prelim
  • French Services PMI (Jul) Prelim
  • German Manufacturing PMI (Jul) Prelim
  • German Services PMI (Jul) Prelim
  • Eurozone Manufacturing PMI (Jul) Prelim
  • Eurozone Markit Composite PMI (Jul) Prelim
  • Eurozone Services PMI (Jul) Prelim

Thursday, 25th July

  • German IFO Business Expectations, Current Assessment, and Climate
  • IndexesFrench Jobseekers Total
  • ECB Monetary Policy Statement (Jul) and Monetary Policy Decision
  • ECB Press Conference

The Majors

The European majors ended the week on a high note, with the DAX leading the way on the day, rising by 0.26%. For the EuroStoxx600 and CAC40, the gains were more modest. The pair rose by 0.12% and by 0.03% respectively.

In spite of Friday’s gains, the DAX and CAC40 ended the week in the red. The DAX ended the week down by 0.51%, while the CAC40 fell by 0.37%. Bucking the trend on the week was the EuroStoxx600, which rose by 0.06%.

The European markets closed ahead of news of Iran seizing a UK tanker in the Gulf, which pinned back the U.S majors on the day. Support on the day came from expectations of a FED rate cut at the end of the month.

Sentiment towards FED monetary policy was mixed, however. Late on Thursday, FOMC member Williams said that the FED should act quickly as the economy slows. A member of the NY FED, however, stated that Williams’ comments were unrelated to FED monetary policy, reversing the impact of Williams’ comments.

The Stats

It was a quieter day on the economic calendar on Friday, with no material stats out of the Eurozone on Friday.

The lack of stats left the European majors exposed to economic data and corporate earnings out of the U.S on the day.

On the data front, the Michigan Consumer Expectations Index rose from 89.3 to 90.1, coming in ahead of a forecasted 89.8. The Michigan Consumer Sentiment Index also improved, rising from 98.2 to 98.4, according to July prelim figures.

The Market Movers

From the DAX, the auto sector was mixed at the end of the week. Continental led the way, rallying by 2.46%, with BMW rising by 0.27%. Daimler and Volkswagen saw red on the day, however, with falls of 0.10% and 0.22% respectively.

It was a bearish end to the week for the banks, however. Deutsche Bank fell by 1.74%, with Commerzbank ending the day down by 2.34%.

From the CAC, BNP Paribas fell by 0.89%, with Soc Gen sliding by 1.52%. Credit Agricole ended the day flat following a 1.6% slide on Thursday. Renault also struggled, falling by 0.62% on Friday.

The Day Ahead

There are no material stats due out of the Eurozone to provide direction at the start of the week. A lack of stats will leave the majors exposed to geopolitical risk throughout the day.

The markets will need to consider Brexit, rising tensions in the Middle East and any updates on trade talks.

At the time of writing, the DAX futures was up by 8.5 points, while the Dow Mini was up by 13 points.

European Equities: Stats, FOMC Member Chatter and Trump in Focus

Economic Calendar:

Friday, 19th July

  • German PPI m/m(Jun)

The Majors

It was back in the red for the majors. The DAX led the way down on Thursday, falling by 0.92% to pull the index into the red for the current week.

The CAC and EuroStoxx600 also saw red, with the pair falling by 0.38% and by 0.22% respectively.

Negative sentiment towards trade and corporate earnings results ultimately did the damage. The European markets had closed ahead of some dovish chatter from FOMC member Williams.

The Stats

It was a quieter day on the economic calendar on Thursday, with no material stats out of the Eurozone on Friday.

The lack of stats left the European majors exposed to economic data and corporate earnings out of the U.S on the day.

On the data front, the Philly FED Manufacturing Index jumped from 0.30 to 21.80, with the employment sub-index rising from 15.40 to 30.00.

According to the latest Philly FED survey,

  • 56% of firms reported an increase in demand versus 32% reporting a fall in demand.
  • The current new orders index was also on the rise, increasing by 11 points, with the shipments index rising by 8 points in July.
  • Futures indicators were skewed to the positive. Close to 53% of firms expected increases in activity over the next 12-months, well above 15% that expected a decline.
  • Future capital spending improved by 9 points to 36.9, its highest reading in 17-months.

The numbers were not enough for the majors, however, which failed to move out of the red on the day.

The Market Movers

From the DAX, the usual suspects were back in the red. From the auto sector, Daimler was the worst-performing, sliding by 1.72%. Continental (-0.48%) and Volkswagen (-0.33%) were also amongst the bottom 10 stocks on the day. BMW saw a more modest 0.18% loss on the day. The sector struggled as the markets responded to reports of U.S – China trade talks being stuck on Huawei.

From the banking sector, Commerzbank tumbled by 2.24%, while Deutsche Bank ended the day flat.

From the CAC, BNP Paribas slipped by 0.41%, with Soc Gen ending the day down by 0.48%. Credit Agricole was amongst the worst performers on the day, falling by 1.6%. Renault also struggled, falling by 1.53% on Thursday.

The Day Ahead

Economic data due out of the Eurozone is limited to June wholesale inflation numbers out of Germany.

Barring an unexpected jump in inflation, the numbers are unlikely to have a material impact on the European majors.

With economic data out of the Eurozone on the lighter side, U.S consumer sentiment and expectation figures will likely influence later in the day.

There are no major earnings releases out of the U.S on the day to influence, which will leave the markets to consider the results from earlier in the week.

On the geopolitical front, any chatter from the U.S administration will also need to be considered on the day. Trade war chatter and Trump’s Friday Twitter sessions will also be a factor on the day.

Following mixed signaling from the FED on policy yesterday, we can also expect the majors to be sensitive to any chatter on monetary policy.

At the time of writing, the DAX was up by 74.5 points, while the Dow Mini was up by 124 points.

European Equities: Corporate Earnings in Focus

Economic Calendar:

Friday, 19th July

  • German PPI (MoM) (Jun)

The Majors

It was a day in the red for the European majors on Wednesday. The CAC40 led the way, falling by 0.76% with the DAX30 ending the day down by 0.72%. The EuroStoxx600 saw a more modest loss of 0.37% on the day.

It wasn’t much better in the U.S, with the U.S majors also seeing red on the day as demand for U.S Treasuries rose through the session.

The Stats

It was a quieter day on the economic calendar on Wednesday. Key stats were limited to the Eurozone’s finalized June inflation figures.

According to figures released by Eurostat,

  • The annual rate of inflation picked up from 1.2% to 1.3% in June, coming in ahead of a prelim and forecasted 1.2%.
  • In June 2018, the annual rate of inflation stood at 2.0%.
  • Greece (0.2%) and Cyprus (0.3%) reported the lowest annual rate of inflation, while Latvia recorded the highest, at 3.1%.
  • The highest contribution came from services (+0.73 percentage points), food, alcohol & tobacco (+0.30 pp) and non-energy industrial goods (+0.07 pp).
  • Month-on-month, consumer prices rose by 0.2%, which was better than a forecasted and prelim 0.1%.
  • The annual rate of core inflation came in at 1.1%, which was in line with forecasts and prelim, whilst up from 0.8% in May.

From the U.S session, stats were limited to housing sector figures that had a muted impact on the European majors.

Outside of the stats, sentiment towards corporate earnings and Trump’s latest comments on the U.S – China trade talks weighed.

Trump stated that trade talks have a long way to go, which was of no surprise but weighed on risk sentiment on the day. The U.S President also said that the U.S could roll out additional tariffs if they wanted…

The Market Movers

From the DAX, bank and auto stocks saw deep red on the day. Continental was amongst the worst performing, sliding by 1.69%, closely followed by Volkswagen, which fell by 1.64%. Daimler and BMW ended the day down by 1.17% and 1.18% respectively. Things were not much better for the banks. Deutsche Bank fell by 1.38%, with Commerzbank sliding by 1.91%.

From the CAC, bank stocks also suffered. BNP Paribas fell by 1.59%, with Credit Agricole and Soc Gen ending the day down by 1.39% and by 1.19% respectively. Renault also saw red, falling by a more modest 0.78%.

The Day Ahead

There are no material stats due out of the Eurozone to provide direction on the day. The lack of stats will leave the majors exposed to corporate earnings and the U.S economic calendar and trade chatter.

On the U.S data front, July’s Philly FED manufacturing numbers are due out later in the day, which will influence risk sentiment.

On the U.S corporate earnings front, Microsoft and American Express are amongst the major earnings releases later in the day.

Ahead of the European open, the Asian markets were in the red at the time of writing. The Nikkei saw the heaviest losses, falling by 1.77%, while the ASX200 was down by 0.54%. The Hang Seng and CSI300 were down by 0.49% and by 0.60% respectively.

At the time of writing, the DAX futures was down by 100.5 points, while the Dow Mini was down by 75 points.

European Equities: A Light Calendar Leaves Earnings and Trade in Focus

Economic Calendar:

Wednesday, 17th July

  • Eurozone Core CPI (YoY) (Jun) Final
  • Eurozone CPI (YoY) (Jun) Final
  • Eurozone CPI (MoM) (Jun) Final

Friday, 19th July

  • German PPI (MoM) (Jun)

The Majors

It was a day in the green for the majors on Tuesday. Leading the way was the CAC40, which rose by 0.65%. The DAX30 and EuroStoxx600, both ended the day up by 0.35%.

The gains came in spite of disappointing economic data out of Europe and positive stats out of the U.S that questioned further the chances of a FED rate cut.

The Stats

Economic data out of the Eurozone on Tuesday included July ZEW economic sentiment figures for the Eurozone and Germany.

The Eurozone’s May trade figures also provided direction on the day.

Germany’s ZEW Economic Sentiment Index fell from -21.10 to 24.5, with the current conditions index falling from 7.8 to -1.1 in July.

For the Eurozone, the ZEW economic sentiment index rose by -20.20 to -20.30.

On the trade front, the Eurozone’s trade surplus widened from €15.7bn to €23.0bn in May. According to Eurostat,

  • Exports of goods to the rest of the world increased by 7.1% compared with May 2018.
  • The imports of goods from the rest of the world increased by 4.2% compared with May 2018.
  • Intra-euro trade increased by 4.9%, year-on-year.

Out of the U.S, retail sales figures and corporate earnings also influenced on the day.

Retail sales came in ahead of forecasts, with sales rising by 0.4% in June. Core retail sales also rose by 0.4%, month-on-month.

On the negative front, industrial production stalled in May, however.

While the stats provided direction, U.S corporate earnings had the final say on the day.

On the corporate earnings front better than expected earnings from Citigroup and Goldman Sachs provided support.

The Market Movers

From the DAX, Deutsche Bank led the way, gaining 0.55%. Commerzbank had a far better day, however, surging by 2.58%. From the auto sector, it was red for German car manufacturers. BMW led the way down, falling by 0.18%. Volkswagen (-0.14%), Continental (-0.13%), and Daimler (-0.09%) weren’t far behind.

From the CAC, it was a better day for the banking sector. Soc Gen rallied by 1.25%, with Credit Agricole rising by 1% on the day. BNP Paribas was close behind, rising by 0.85%.

The Day Ahead

It’s a quieter day on the economic calendar. Key stats are limited to the Eurozone’s finalized June inflation figures.

Barring an unexpected build-up in inflationary pressures, we would expect the inflation figures to have a muted impact on the majors.

From the U.S session, stats are limited to housing sector figures that will also have a muted impact on the European majors.

U.S corporate earnings will continue to have an influence, with Bank of America the big earnings release of the day.

Ahead of the European open, the Asian markets were mixed at the time of writing. The Hang Seng and CSI300 were down by 0.28% and by 0.05% respectively. The Nikkei and ASX200 were mixed, however. The Nikkei ended the day with a 0.31% loss, while the ASX200 closed out the day up by 0.49%.

At the time of writing, the DAX and CAC were down by 6.5 points and 11.5 respectively, while the Dow Mini was up by 13 points.

European Equities: Stats Out of China May Not Be Enough…

Economic Calendar:

Tuesday, 16th July

  • Italian CPI (MoM) (Jun) Final
  • German ZEW Current Conditions (Jul)
  • German ZEW Economic Sentiment (Jul)
  • Eurozone ZEW Economic Sentiment (Jul)
  • Eurozone Trade Balance (May)

Wednesday, 17th July

  • Eurozone Core CPI (YoY) (Jun) Final
  • Eurozone CPI (YoY) (Jun) Final
  • Eurozone CPI (MoM) (Jun) Final

Friday, 19th July

  • German PPI (MoM) (Jun)

The Majors

It was a mixed end to the week for the majors on Friday. The DAX ended the day in the red, falling by 0.07%, while the EuroStoxx600 and CAC40 gained 0.15% and 0.38% respectively.

For the week, the DAX was the worst performer, sliding by 1.95%. Both the EuroStoxx600 and CAC40 saw more modest losses of 0.84% and 0.37% respectively.

While the trio ended the week in the red, the DAX saw red for a 6th consecutive day on Friday, supporting the heavier losses for the week.

The Stats

Economic data out of the Eurozone included finalized June inflation figures out of Spain and the Eurozone’s May industrial production numbers.

While the markets brushed aside the finalized inflation numbers, the Eurozone’s industrial production figures provided support.

According to Eurostat,

  • Industrial production increased by 0.9% in May, month-on-month, reversing a 0.4% fall in April.
  • Production of non-durable consumer goods and durable consumer goods rose by 2.7% and by 2.3% respectively. Also on the rise were the production of capital goods (+1.3%) and energy (+0.7%).
  • Bucking the trend was the production of intermediate goods, which fell by 0.2%.
  • By member state, Ireland and France recorded the largest increases in production, rising by 2.3% and by 2.1% respectively.
  • Year-on-year, industrial production fell by 0.5%.
  • By member state, Malta and Germany recorded the largest falls in production, with declines of 5.1% and 4.3% respectively.
  • Ireland reported the largest increase, up by 8.2%.

Ahead of the production figures, China’s trade data for June tested risk sentiment, with both imports and exports in reverse in June.

With economic data out of the U.S limited to wholesale inflation figures, there was little from the U.S economic calendar to provide support.

The Market Movers

From the DAX, Deutsche Bank was amongst the front runners once more on Friday, rallying by 2.24%, with a UBS upgrade driving demand for the beleaguered bank. Commerzbank saw a more modest gain of just 0.23% on the day.

It was a better day for the auto sector as well. Continental gained 1.8% on Friday, with BMW rising by 0.84% and Volkswagen up by 0.81%. Daimler bucked the trend on the day, however, with a 1.13% loss. The loss came off the back of a profit warning to investors.

From the CAC, it was a mixed bag for the bank stocks. BNP Paribas fell by 0.09%, while Soc Gen and Credit Agricole rose by 1.09% and by 0.23% respectively. Renault found support on the day, rising by 0.95%.

The Day Ahead

It’s a quiet day ahead on the Eurozone’s economic calendar. With no material stats due out, China’s 2nd quarter GDP, retail sales, and industrial production figures will set the mood going into the session.

While the economy grew at the slowest pace in almost 3-decades, the stats were better than had been expected, providing some support.

From the U.S, NY Empire State manufacturing numbers will likely provide direction late in the day.

Outside of the numbers, expect any chatter on trade to also provide direction.

Ahead of the European open, the Asian markets were mixed at the time of writing. The Hang Seng and CSI300 were up by 0.07% and by 0.24% respectively. The Nikkei was up by 0.2%, while the ASX200 was down by 0.51%.

At the time of writing, the DAX futures was up by 29 points, while the Dow Mini was up by 24 points.

European Equities: Can the Majors Stop the Slide?

Economic Calendar:

Friday, 12th July

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

The Majors

The majors continued to see red on Thursday. The EuroStoxx600 led the way down on the day, falling by 0.45%. It wasn’t much better for the DAX30 and CAC40, which fell by 0.33% and by 0.28% respectively.

The reversals through the week have left the DAX down by 1.88% Monday to Thursday.

The Stats

Economic data out of the Eurozone on Thursday included finalized June inflation figures out of Germany and France.

The ECB also released its monetary policy meeting minutes from the 6th June monetary policy decision.

While the stats and the minutes had a muted impact on the majors on the day, the IMF weighed on the day.

The IMF stated on Thursday that the Eurozone economy faced rising risks that were attributed to the Brexit, Italy, and trade.

Interestingly, the IMF also called for the ECB to loosen monetary policy further. The statement came following last week’s announcement that Lagarde would take over later this year.

On the trade front, Trump was back on Tweeter, this time complaining about China trade practices, which weighed. Trump’s reaction to a new digital services tax in France, aimed at targeting the U.S tech giants, was also negative.

On the U.S economic calendar, U.S June inflation figures and FED Chair Powell’s 2nd day of testimony to Congress also provided direction.

While the annual rate of inflation picked up to 2.1%, FED Chair Powell continued to assure lawmakers of FED support. The reassurances led to fresh highs for the S&P500.

The Market Movers

From the DAX, Deutsche Bank was amongst the front runners on the day, rising by 1.07%, with Commerzbank rallying by 1.51%. It was a different story for the auto sector, however, with Continental the worse performer on the day. Continental slid by 2.65%, with Daimler falling by 0.83%. BMW was not far behind, down by 0.56% on the day, while Volkswagen slipped by just 0.04%.

From the CAC, it was a mixed bag for the bank stocks. BNP Paribas fell by 0.29%, while Soc Gen rose by 0.04%. Credit Agricole ended the day flat. Renault joined its German peers in the red, falling by 0.73%.

The Day Ahead

It’s a relatively busy day ahead, with finalized June inflation figures, Spain, and Eurozone industrial production figures due out.

We would expect the markets to brush aside the finalized inflation figures and focus on the industrial production numbers.

From the U.S session, June wholesale inflation figures could also provide direction should the numbers come in ahead of forecast. Strong numbers would be considered negative.

Ahead of the European open, the Asian markets were mixed at the time of writing. The Hang Seng and CSI300 were up by 0.44% and by 0.69% respectively. The Nikkie and ASX200 were flat.

At the time of writing, the DAX was up by 49.5 points, while the Dow Mini was up by 95 points.

European Equities: Day 2 of Testimony, the ECB and Inflation to Influence…

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 saw red for a 4th consecutive day on Wednesday. Leading the way down once more was the DAX30, which fell by 0.51%. The EuroStoxx600 fell by 0.2%, with the CAC40 falling by 0.08% on the day.

It was a different story in the U.S, where the S&P500 and NASDAQ rose by 0.45% and by 0.75% respectively. The Dow saw a more modest 0.29% gain on the day.

Driving the majors on the day was sentiment towards monetary policy, with FED Chair Powell’s testimony to Congress and the FOMC meeting minutes in focus.

The Stats

There were no material stats out of the Eurozone on Wednesday to provide the majors with direction. The lack of stats left the majors sensitive to moves through the Asian session and the U.S economic calendar.

On the U.S economic calendar, it was all eyes on FED Chair Powell’s testimony to Congress. FED Chair Powell reassured the markets that the FED would deliver should the need arise, but held back from fully committing to a rate cut. While sitting on the fence to a certain degree, the tone was on the dovish side.

It wasn’t enough to give the European majors a boost, however.

On the geopolitical front, U.S – China trade talks began on Tuesday, with the U.S administration stating that talks were constructive. The update may well have been an indicator of just how long negotiations could drag out for…

The Market Movers

From the DAX, Deutsche Bank was amongst the top performers on the day, rising by 0.81%. Commerzbank found strong support, rallying by 2.51% as the banking sector bounced back. It was doom and gloom for the auto sector, however. Continental was the worst performer on the day, sliding by 1.82%. Daimler (-1.34%), Volkswagen (-1.05%) and BMW (-0.97%) weren’t far behind…

From the CAC, BNP Paribas ended the day with a 0.28% gain, with Credit Agricole up by 0.32%. Soc Gen led the way, rallying by 1.01%. Renault joined its German peers in the red, falling by 0.94% on the day.

The Day Ahead

It’s a busy day ahead, with finalized June inflation figures due out of France and Germany. Outside of the numbers, the ECB monetary policy meeting minutes are also due out and will influence the majors.

While Draghi had held back from talking about further policy easing at the last press conference, the minutes could provide more color on what lies ahead.

From the U.S session, June inflation figures and FED Chair Powell’s 2nd day of testimony to Congress will also be of influence.

While Powell is unlikely to deliver a different outlook from Wednesday’s testimony, there may be more details to consider.

At the time of writing, the DAX was up by 30.5 points, while the Dow Mini was up by 30 points.

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.