Thursday, 4th March
German IHS Markit Construction PMI (Feb)
ECB Economic Bulletin
Eurozone Retail Sales (MoM) (Jan)
Eurozone Unemployment Rate (Jan)
Friday, 5th March
German Factory Orders (MoM) (Jan)
It was another relatively bullish day for the European majors on Wednesday.
The CAC40 and the DAX30 saw gains of 0.35% and 0.29% respectively, while the EuroStoxx600 ended the day flat.
It was a choppy session for the majors, which faced rising Treasury yields late in the European session. News that the U.S would have enough vaccine doses to vaccinate everyone in the U.S before the summer drove yields higher.
Earlier in the session, economic data from the Eurozone had delivered mixed results. While the February PMI numbers were largely better than expected, the Eurozone’s private sector continued to contract.
It was a busy day on the economic calendar on Wednesday. Service sector PMI numbers for Italy and Spain were in focus early in the European session.
Finalized service and composite PMI figures for France, Germany, and the Eurozone also provided the majors with direction.
In February, Spain’s services PMI increased from 41.7 to 43.1. Economists had forecast a rise to 43.0.
Service sector activity also continued to contract in Italy. In February, the Services PMI increased from 44.7 to 48.8, coming in ahead of a forecasted 46.0.
For France, the services PMI fell from 47.3 to 45.6 in February, which was up from a prelim 43.6.
German’s Services PMI fell from 46.7 to 45.7, which was down from a prelim 45.9.
It was a different story for the composite PMIs, however.
An impressive pickup in manufacturing sector activity in Germany led to a rise in the German composite from 50.8 to 51.1. This was down marginally from a prelim 51.3.
For France, the Composite fell from 47.7 to 47.0. This was up from a prelim 45.2, however.
For the Eurozone, the Services PMI rose from 45.4 to 45.7 in February, which was better than a prelim 44.7.
As a result of better numbers from Italy and Spain, the Composite PMI rose from 47.8 to 48.8, an upward revision from a prelim 48.1.
According to the February survey,
- The modest fall in activity was closely linked to a decline in new orders, which fell for a 5th consecutive month.
- In spite of this, new export business increased at its strongest pace for nearly 3-years.
- For the Eurozone, there was a net increase in employment for the 1st time in 12-months.
- Input cost inflation was recorded for the 9th successive month and to the sharpest degree since the Nov-2018.
- As a result, output charges rose for the first time since last February.
- Optimism hit its highest level in 3-years, supported by the rollout of vaccines and easing of restrictions.
From the U.S
The market’s preferred ISM Non-manufacturing PMI and ADP nonfarm employment change figures were in focus late in the session.
In February, the ISM Non-Manufacturing PMI fell from 58.7 to 55.3. Economists had forecast for the PMI to hold steady at 58.7.
- The Price Index rose from 64.2% to 71.8%, aligned with a marked pickup in inflationary pressures in other major economies.
- Other sub-indexes were in decline, weighing on the headline PMI figures.
- ISM Non-Manufacturing Business Activity Index fell from 59.9 %to 55.5%.
- The Employment Index fell from 55.2% to 52.7%.
- Finally, the New Orders Index slid from 61.8% to 51.9%.
The ADP Nonfarm Employment figures for February also disappointed, with employment rising by just 117k in February. Economists had forecast a 177k rise following a 195k increase in January.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Wednesday. BMW (+4.54%), Continental (+4.49%), and Volkswagen (+4.67%) led the way, while Daimler trailed with a more modest 0.94% gain.
It was also a bullish day for the banks. Deutsche Bank ended the up by 1.62%, with Commerzbank gaining 1.02%.
From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.52% and by 2.46% respectively, with Soc Gen rallying by 3.62%.
It was a mixed day for the French auto sector, however. Stellantis NV slipped by 0.22%, while Renault rallied by 5.21%. While Stellantis closed out the day in the red, Stellantis delivered positive earnings and an optimistic outlook on Wednesday that supported the broader auto sector.
Air France-KLM eked out a 0.07% gain, with Airbus SE ending the day up by 1.37%.
On the VIX Index
It was a 2nd consecutive day in the green for the VIX on Wednesday. Following a 3.21% gain on Tuesday, the VIX rose by 10.66% to end the day at 26.67.
Rising U.S Treasury yields delivered the upside for the VIX, as the U.S equity markets responded to vaccine updates from the administration.
The NASDAQ slid by 2.70%, with the Dow and S&P500 falling by 0.39% and by 1.31% respectively.
The Day Ahead
It’s another busy day ahead on the European economic calendar. Key stats include retail sales and unemployment figures for the Eurozone, with the ECB Economic Bulletin due out ahead of the numbers.
While we can expect some market sensitivity to the numbers, expect the ECB Economic Bulletin to be the key driver early on.
With the ECB in action next week, the markets will be looking for clues on what to expect at the press conference. Inflation, the economic outlook, EUR strength, and their impact on monetary policy will likely be the main areas of focus.
From the U.S, the weekly jobless claims figures and January factory order numbers will also influence late in the European session.
In the futures markets, at the time of writing, the Dow Mini was down by 45 points.
For a look at all of today’s economic events, check out our economic calendar.