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European Equities: Economic Data and Central Bank Chatter in Focus

Economic Calendar

Friday, 4th June

German IHS Markit Construction PMI (May)

Eurozone Retail Sales (MoM) (Apr)

ECB President Lagarde Speaks

The Majors

It was mixed day for the European majors on Thursday.

The DAX rose by 0.19%, while the CAC40 and the EuroStoxx600 fell by 0.21% and by 0.12% respectively.

Positive economic data from both the Eurozone and the U.S provided the markets with support on the day.

Particularly impressive ADP nonfarm employment change figures from the U.S and a further decline in jobless claims did weigh, however.

Surging inflation and a marked improvement in labor market conditions in the U.S raises the prospect of a sooner, rather than later, move by the FED.

The Stats

It was a busy day on the economic data front. Service sector PMI figures for Italy and Spain were in focus this morning.

Finalized service and composite PMIs for France, Germany, and the Eurozone also drew interest.

In May, Spain’s services PMI rose from 54.6 to 59.4, with Italy’s services PMI increasing from 47.3 to 53.1.

Economists had forecast PMIs of 58.0 and 52.5 respectively.

For France, the services PMI rose from 50.3 to 56.6, which was in line with prelim figures.

Germany’s services PMI was also in line with prelims, increasing from 49.9 to 52.8 in the month.

The Eurozone Composite

For the Eurozone, the services PMI jumped from 50.5 to 55.2 in May, which was up from a prelim 55.1.

For May, the Composite PMI came in at 57.1. This was up from an April 53.8 and a prelim 56.9.

According to the finalized Markit Survey,

  • A marked increase in service sector activity supported the increase in the composite PMI.
  • The easing of lockdown measures supported the pickup in service sector activity.
  • New business increased for the first time since last July, leading to an increase in backlogs.
  • Employment rose across the services sector at the strongest pace since Feb-2020.
  • Vaccine optimism also drove sentiment to its highest level in over 17-years.
  • In spite of the rebound in service sector activity, the manufacturing sector remained the key driver.
  • At country level, Ireland’s private sector led the way, with Spain also performing strongly.
  • While France also saw a strong pickup, Germany only recorded a modest improvement.
  • Italy recorded the weakest net rise in private sector output.

From the U.S

It was also a busy day on the economic calendar.

ADP nonfarm employment change and weekly jobless claims were in focus along with the market’s favored ISM Non-Manufacturing PMI figures for May.

In May, nonfarm payrolls increased by 978k according to the ADP, coming in ahead of a forecasted 650k increase. In April, nonfarm payrolls had risen by 654k.

Initial jobless claim figures also impressed. In the week ending 28th May, initial jobless claims fell from 405k to 385k. Economists had forecast a decline to 390k.

Service sector PMI numbers were also positive, with the ISM Non-Manufacturing PMI climbing from 62.7 to 64.0. Economists had forecast an increase to 63.0.

Other stats included nonfarm productivity and until labor costs for the 1st quarter and finalized Markit service PMI numbers.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. BMW rallied by 3.83% to lead the way, with Continental and Daimler ending the day up by 1.65% and by 1.89% respectively. Volkswagen rose by a more modest 0.42% on the day.

It was a relatively bullish day for the banks. Deutsche Bank and Commerzbank ended the day with gains of 0.82% and 0.59% respectively.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.77% and by 0.49% respectively, while Credit Agricole fell by 0.42%.

It was a bullish day for the French auto sector. Stellantis NV rose by 1.14%, with Renault ending the day up by 0.81%.

Air France-KLM slid by 4.64%, however, with Airbus SE falling by 0.83%.

On the VIX Index

It was back into the green for the VIX on Thursday, marking a 3rd rise in 4 sessions.

Reversing a 2.35% fall from Wednesday, the VIX rose by 3.20% to end the day at 18.04.

The NASDAQ slid by 1.03, with the Dow and the S&P500 ending the day down by 0.07% and by 0.36% respectively.

VIX 040621 Daily Chart

The Day Ahead

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

Eurozone retail sales for April are due out later this morning along with HIS Markit Construction PMI figures from Germany.

Following disappointing retail sales figures from Germany and France, the markets will be expecting a Eurozone-wide decline.

From the U.S, labor market figures for May will be the key stats of the day, however. Following disappointing April nonfarm payroll numbers, the markets will be looking for a marked increase in May.

On the monetary policy front, ECB President Lagarde and FED Chair Powell are also scheduled to speak. Expect any chatter on monetary policy to influence.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 26 points.

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