Cac 40 negative.

European Equities: French Business and Consumer Confidence in Focus along with FOMC Chatter

Economic Calendar:

Thursday, 27th May 2021

GfK German Consumer Climate (Jun)

Friday, 28th May 2021

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) Final

French CPI m/m (May) Prelim

French HICP m/m (May) Prelim

The Majors

It was mixed day for the European majors on Tuesday.

The CAC40 fell by 0.28%, while the DAX30 and EuroStoxx600 rose by 0.18% and by 0.03% respectively.

Economic data from the Eurozone provided support early in the day, with German’s IFO Business Climate Index on the rise.

Adding to the upside for the DAX30 early in the session was news of Vonovia SE (“VNA:GR”) agreeing to take over Deutsche Wohnen SE (“DWNI:GR”) in a multi-billion EUR deal. The DAX30 had hit a fresh record high on the news before easing back.

The Stats

Economic data from the Eurozone included finalized GDP numbers and business sentiment figures from Germany.

German GDP

In the 1st quarter, the German economy contracted by 1.8%, quarter-on-quarter, down from a prelim 1.7%. In the 4th quarter of last year, the economy had expanded by 0.5%.

According to Destatis,

  • Household final consumption expenditure fell by 5.4%, quarter-on-quarter.
  • Government final consumption expenditure rose by a modest 0.2%.
  • Gross fixed capital formation in construction rose by 1.1%, while GFCF in machinery and equipment slipped by 0.2%.

Year-on-year, the economy contracted by 3.1%.

IFO Business Climate

In May, the IFO Business Climate Index increased from 96.6 to 99.2. Economists had forecast an increase to 97.8.

Optimism improved, with the Business Expectations Index rising from 99.2 to 102.9. Assessment of current conditions also improved, with the Current Assessment Index climbing from 94.2 to 95.7.

Economists had forecast increases to 101.4 and to 95.5 respectively.

According to the IFO survey,

  • In manufacturing, the index rose modestly, with expectations falling, while firms remained satisfied with current conditions.
  • For the services sector, the Business Climate Index climbed to its highest level since Feb-2020. A marked rise in optimism and improved sentiment towards current conditions supported the upswing.
  • The index for trade was also on the rise. Firms were less pessimistic about what lies ahead, with sentiment towards the current situation seeing further improvement.

From the U.S

Consumer confidence was in focus.

In May, the CB Consumer Confidence Index slipped from 117.5 to 117.2. Economists had forecast an increase to 119.2.

According to the May survey,

  • Consumers’ assessment of present-day conditions improved, while short-term optimism deteriorated.
  • Sentiment towards income prospects also weakened.
  • Consumers’ assessment of the labor market improved, however.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Tuesday. Volkswagen rose by 1.52% to lead the way, with Continental and Daimler rising by 0.78% and by 0.96% respectively. BMW ended the day with a modest loss of 0.14%.

It was also mixed day for the banks. Deutsche Bank slid by 2.05%, while Commerzbank rose by 1.55%.

From the CAC, it was also a mixed day for the banks. BNP Paribas and Credit Agricole ended the day down by 0.36% and by 0.96% respectively. Soc Gen rose by 1.17%.

It was a bullish day for the French auto sector, however. Stellantis NV and Renault ended the day with gains of 0.56% and 0.18% respectively.

Air France-KLM rose by 0.80%, while Airbus SE fell by 1.14%.

On the VIX Index

A run of 3 consecutives day in the red came to an end for the VIX on Tuesday.

Partially reversing an 8.68% fall from Monday, the VIX rose by 2.39% to end the day at 18.84.

The NASDAQ slipped by 0.03%, with the Dow and the S&P500 ending the down by 0.24% and by 0.21% respectively.

VIX 260521 Daily Chart

The Day Ahead

It’s a quiet day ahead on the European economic calendar. There are no material stats from the Eurozone or the U.S to provide the majors with direction.

A lack of stats will place greater emphasis on business and consumer confidence figures from France.

From the U.S, expect any further FOMC chatter on the U.S economy and monetary policy to also draw interest.

On Tuesday, FOMC members talked of the need to begin discussing a tapering to the asset purchasing program in the coming months.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 47 points.

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