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.

European Equities: A Lack of Stats Leaves Geopolitics and Monetary Policy in Focus

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 on Monday. Following on from Friday’s pullback, the DAX ended the day down by 0.2%. While the CAC slipped by just 0.08%, the EuroStoxx600 led the way down, falling by 0.21%.

In the U.S, things were not much better with the NASDAQ falling by 0.78% on the day. The Dow and S&P500 also saw red, falling by 0.43% and 0.48% respectively.

The Stats

Economic data out of the Eurozone was on the lighter side on the day.

German industrial production and trade figures for May provided direction going into the market open.

Industrial production rose by 0.3% in May, month-on-month, partially reversing a revised 2.0% slide in April. Economists had forecast a 0.4% rise.

According to figures released by Destatis,

  • In May, production in industry excl. energy and construction was up by 0.9%.
  • By industry, the production of intermediate goods fell by 0.5%, while the production of capital goods rose by 2.0%. Production of consumer goods was also on the up, rising by 1.1%.
  • Outside of industry, energy production and production in construction fell by 2.2% and by 2.4% respectively.
  • Year-on-year, industrial production was down by 3.7%, which was the telling blow.

The trade surplus widened from €17.0bn to €18.7bn in May. Economists forecasted for the trade surplus to hold steady at €17.0bn

According to the figures released by Destatis,

  • Exports rose by 1.1%, month-on-month and by 4.5% year-on-year.
  • Imports fell by 0.5%, month-on-month, while up by 4.9% year-on-year.

There were no material stats out of the U.S to influence the majors on the day.

On the monetary policy front, last week’s U.S nonfarm payroll figures continued to raise doubts over a FED rate cut later in the month.

The markets will need to wait until tomorrow, where FED Chair Powell will deliver testimony to Congress. Powell is scheduled to speak later today but may hold back on any chatter on policy ahead of Wednesday’s testimony.

Ahead of the European open, the Asian majors saw red to set the tone on the day.

The Market Movers

From the DAX, Deutsche Bank led the way down on the day, sliding by 5.9%. The bank’s restructuring plans did the damage on the day, as the markets responded to the bank’s decision to move away from core businesses.

Commerzbank Joined Deutsche in the red, sliding by 3.57% as the banking sector came under fire at the start of the week.

Things were not much better for the auto sector. While Volkswagen ended a 2nd consecutive day unchanged, the rest were in the red.

Daimler saw the heaviest losses, falling by 1.46%. Continental and BMW ended the day down by 0.76% and by 0.87% respectively.

From the CAC, BNP Paribas fell by 1%, with Credit Agricole ending the day down by 1.39%. Renault also saw red, falling by 1.9%.

The Day Ahead

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

The lack of stats will leave market sentiment towards FED and ECB monetary policy to provide direction ahead of FED Chair Powell’s testimony to Congress tomorrow.

While the focus is on tomorrow’s testimony, it remains to be seen whether Powell will provide the markets with any forward guidance in a scheduled speech later today. The FED Chair is due to speak on stress testing at the Federal Reserve Board Conference.

Ahead of the European open, it was a mixed start to the day in the Asian markets, with the Nikkei up by 0.61%, while the ASX200 was down by 0.1%.

European Equities: German Economic Data in Focus

Economic Calendar:

Monday, 8th July

  • German Industrial Production (MoM) (May)
  • German Trade Balance (May)

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 on Friday, with the DAX falling by 0.49%. The CAC40 and EuroStoxx600 fell by 0.38% and by 0.72% respectively.

In spite of the Friday losses, the European majors made solid gains at the start of the 3rd quarter. The DAX30 and EuroStoxx600 ended the week up by 1.37% and by 1.36% respectively. The CAC40 trailed, with a gain of 0.99%.

For the DAX30, Friday’s loss brought to an end a run of 7 consecutive days in the green.

The Stats

Economic data out of the Eurozone was on the lighter side on the day.

German factory orders provided direction in the early part of the day. While the service sector PMI numbers provided support mid-week, a 2.2% slide in factory orders in May weighed going into the European session.

According to Destatis,

  • Domestic orders increased by 0.7%, while foreign orders slid by 4.3% in May, month-on-month.
  • New orders from the Euro area were down by 1.7%, with new orders from other countries down by 5.7% compared with April 2019.
  • Factory orders fell by 8.6% year-on-year.

While the factory order numbers weighed, focus through the day was on the U.S nonfarm payrolls due out later in the session.

An unexpected jump in nonfarm payrolls in June added to the downward bias on the day. Nonfarm payrolls increased by 224k, coming in well ahead of a forecasted 160k increase.

The markets had priced in a 100% probability of a July rate hike. The latest NFP numbers tempered market expectations adding to the downside on the day.

The Market Movers

From the DAX, Deutsche Bank continued to find support, leading the way on the DAX with a 2.21% rally on the day. Commerzbank also found support, rising by 1.53%. The better than expected NFP numbers provided support to the financial sector on the day.

From the auto sector, Volkswagen remained unchanged on the day to lead the way. BWM slipped by just 0.04%, with Daimler and Continental down by 0.07% and 0.22% respectively.

From the CAC, BNP Paribas and Credit Agricole rose by 0.84% and 0.09% respectively, while Renault gained 0.37% on the day.

From the EuroStoxx600, UniCredit SpA saw red, in spite of the general uptrend across the global financial stocks, with a loss of 1.2% on the day. The loss came off the back of a 4.96% rally on Thursday, fuelled by news of Italy’s plans to curb debt.

The Day Ahead

It’s a relatively busy day ahead. German industrial production and trade figures for May are due out ahead of the European open.

We can expect the numbers to influence the majors in the early part of the day. While there are no material stats due out of the U.S this afternoon, we can expect any chatter from the Oval Office to also be of influence.

At the time of writing, the DAX was down by 21 points, with the Dow Mini was down by 28 points.

Is The Debt Crisis About To Be Reborn In 2020? – Part II

The Transportation Index has not recovered to levels from the September 2018 peak.  This lower price rotation in the Transportation Index suggests the global economy is not expecting growth in the near future.

Other than Precious Metals, the Commodities sector has rebounded off of recent lows but has yet to see any real price advancement – suggesting that demand for raw commodities is rather weak.

The Real Estate sector in the US is starting to falter near a current high price level.  We are seeing price decreases hit the markets as sellers are desperate to attract buyers.  This could be a warning that a price revaluation event is about to unfold in the US.

Super-Cycles suggest a moderately sized price rotation between now and early 2020 (likely greater than 20% in size).  This rotation, should it happen, will become a price revaluation event that could attempt to “shake loose” some of the sector pricing and forward expectations we’ve mentioned (above).

Our bigger concern is the localized state and federal pension and retirement issues that continue to respond with higher levels of financial commitments and greater levels of annual budgets as related to ongoing capacity and operational activities in the US.

If an unwinding event was to unfold in or near 2020, it is our belief that a pricing revaluation event related to any of the core economic factors above (particularly with Real Estate, Economic Cycles, the US Presidential Elections, and a soft/weakening US economy) could result in a much larger price revaluation event taking place.  This would create extended pressures on local State and Federal expenses and highlight debt issues that can often be hidden behind “creative accounting” tricks.

State and Local Government Debt Securities and Loan Liability levels have stayed elevated, yet somewhat flat over the past 10+ years.  It is very likely that these debt levels have been contained because of the US easy money policies of the past 10+ years.  When the US Dollar is cheap and easy to repay, these debt levels don’t look so difficult.

https://www.thetechnicaltraders.com/wp-content/uploads/2019/07/fredgraph_StateLocal_Debt_NoPensions.png

Pension and retirement systems/fund are a completely different story for State and Local government agencies.  Asset flows have dramatically increased in volatility after 2000.  Additionally, the depth and magnitude of asset outflows have become quite dangerous while price revaluation events were unfolding (2000 to 2004 and 2008 to 2015).  Outflows in state and federal pension and retirement funds create large forward operational pressures and shortfalls in expected funding levels.  These decreases in funding should be made whole by the State or City – but they are rarely ever repaid in full.

As these “wholes” in the pension and retirement systems continue to fester (resulting in decreased funds for pensioners and decrease fund to be deployed as investment assets), the problems begin to compound over time.  More and more retirees and pensioners start drawing benefits while the system continues to take in less and less – never actually catching up in total value.

https://www.thetechnicaltraders.com/wp-content/uploads/2019/07/chart2-6.png

One big revaluation event, or possibly two, from now and we believe the entire system will create a multiple Trillion Dollar debt crisis within the US and possibly throughout the modern world.  We believe the under-estimated state and federal pension/retirement funding issue is the next shoe to drop and that it will take a price revaluation event to expose the risks that are evident within this failed “Ponzi” scheme.  Read the recent news about Chicago and Illinois to learn just how dangerous these entitlement contraptions really are.

Let’s assume that a revaluation event does take place within the next 5 to 10+ years – this would be something like a Real Estate price correction or some type of stock market, asset market price correction related to local or global economic issues.  Could these massive asset funds handle an extended DRAWDOWN from their funds while Cities, States, and Federal agencies attempt to deal with declining revenues?  How much time would it take for these pension and retirement funds to fall into crisis or insolvency?

By our estimates, the current asset levels in the US retirement/pension system have just started to breach the lower asset level channel originating from 1970 to 1999 attribution levels.  It has taken 20+ years of  US Fed and global Central Bank market manipulation, as well as President Trump’s incredible US economic and stock market rally, to recover to these levels.

https://www.thetechnicaltraders.com/wp-content/uploads/2019/07/chart3-2.png

Overall, skilled technical traders must be aware of the risks that are ever-present for another crisis event or what we are calling a “price revaluation event” that could create havoc on anyone’s retirement accounts, trading portfolios and/or simple family life/future.  We’re trying to help to highlight what we believe will be the future 16 to 24 months of pricing activity within the US Stock market based on our research tools and our experience/knowledge.

I can tell you that huge moves are about to start unfolding not only in metals, or stocks but globally and some of these supercycles are going to last years. A gentleman by the name of Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
www.TheTechnicalTraders.com

Earnings Season Once Again – Will it Be a Scary One?

It’s that time of the year again! As we have passed into the second half of the year, Earnings season is expected to be a big story in July, with many analysts bracing that it might be one of the worst Earnings season in the past 3 years. Companies began reporting their earnings this week for the fiscal Quarter ending June 2019. The focus, however, turns towards the second and third week of July with a slew of banks reporting along with a few of the tech giants reporting as well.

This corporate earnings announcement season coincides with a period of a global uncertainty accompanied by a resumption of trade concerns (protracted US-China trade negotiations), increased tension with Iran, and worsening growth prospect with a couple of central banks taking a dovish policy turn by suggesting further accommodation could be forthcoming this year.

Amid this unrelenting uncertainty over the global outlook and the dovish turn by banks, global equities have been seen racing to year highs in June, with US equities spiking to fresh record highs. Based on the above, this earnings season could be a key event for equity market this year.

What is it?

Theoretically, earnings season is simply the period in which plenty of the most publicly traded companies publish their quarterly financial report. Such reports could help market participants to gauge the financial health of the company. Significant is the fact that earnings are a key driver of the overall stock market in the long term, as most of these companies are components of some of the world’s most important stock market index, with S&P 500 being the leader of global equity market.

How could it affect markets?

If the majority of companies presented strengthening of their sales and earnings, suggesting growing economy, it could positively affect the direction of their shares but could also bullishly propel the stock market indices in which they belong to. On the flipside, earnings with a worse than expected outcome could add pressure on the performance of the company’s stock and stock markets in general.

As earnings could undoubtedly move stocks essentially due to their higher than average valuations, the overall earnings result for this season could move the stock market in general and could determine its potential direction in a year of political uncertainty.

What you should take note of in this Earnings season?

There are not much hopes this time though, as a 1% y/y decline in aggregate earnings per share is expected, while approximately 80% of the S&P500 companies revised their profit projections lower, just 2 weeks before the season begins, while they cautioned that their results could be worse that what analysts have predicted. As Bloomberg reported, this is the second fastest pace cut in profits seen since 2015. A deterioration of corporate earnings would be another proof of the negative consequences of the US-China trade war in the economy growth.

Hence, at a time in which Dow and S&P 500 are posting their finest June since 1938 and 1955 respectively, the pullback on profits estimations and the high level of pessimism for sure does not support the continuation of a positive outlook for 2 of the world’s most significant stock market indices.

According to FactSet figures, the industries which have announced the possibility of missing targets are Technology and Health care sector. I should highlight here that 5 of the technology sector giants are components of S&P 500 and are reporting within July. These are: Microsoft (Jul. 18), Facebook (Jul. 24), Amazon(Jul. 25), Alphabet (Jul. 25), and Apple Inc (Jul. 30), which are holding nearly 50% of S&P500 market capitalization. These companies have been at the center of the trade war, with Google being the latest example, by blocking Huawei’s access to its Android software for future phones.