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European Equities: The G7 Summit and U.S Economic Data in Focus

Economic Calendar

Friday, 11th June

Spanish CPI (YoY) (May) Final

Spanish HICP (YoY) (May) Final

The Majors

It was another mixed day for the European majors on Thursday.

The CAC40 and the DAX30 fell by 0.26% and by 0.06% respectively, while the EuroStoxx600 eked out a 0.09% gain.

Disappointing economic data from France weighed on the CAC40. The main event of the day, however, was the ECB monetary policy decision and press conference, however.

A more optimistic ECB weighed on the broader markets, with upward revisions to growth and inflation forecasts raising the prospects of a nearer-term move.

The mixed session came in spite of the U.S majors finding support off the back of a further decline in jobless claim figures. Inflationary pressures were also on the rise once more but failed to spook the markets and force a sell-off.

The Stats

It’s was quieter day on the economic data front this morning. Ahead of the European open, French nonfarm payrolls for the 1st quarter were in focus along with French and Italian industrial production figures.

The French Economy

In the 1st quarter, nonfarm payrolls increased by 0.3% following a 0.3% rise from the previous quarter. With COVID-19 lockdown measures in place, the numbers had a muted impact on the EUR.

Industrial production figures for April disappointed, however.

In April, industrial production fell by 0.1% versus a forecasted 0.5% increase. Production had risen by 1.0% in March.

The Italian Economy

In Italy, industrial production rose by 1.8%, following a 0.3% increase in March. Economists had forecast a 0.3% increase.

Year-on-year, production was up by 79.5% versus a forecasted 72.2% rise. In March, production had been up by 38.4% year-on-year.

Monetary Policy

In line with market expectations, the ECB left monetary policy unchanged, leaving the press conference as the key driver.

ECB President Lagarde delivered what the markets were looking for. A more optimistic economic outlook, a lack of concern over near-term inflationary pressures, and no plans to shift on monetary policy.

While avoiding any talk of tapering was key on the day, the upward revisions to both growth and inflation did raise the prospects of a move sooner rather than later.

The ECB revised growth for 2021 up from 4.0% to 4.6%, with inflation up from 1.2% to 1.9%.

Inflation is expected to fall back in 2022 (1.5%) and 2023 (1.4%), however.

In 2022, the Eurozone economy is expected to grow by 4.7% before slowing to 2.1% in 2023. While growth the forecast for 2023 was unchanged from March, growth for 2022 was revised up from 4.1%.

From the U.S

Jobless claims and inflation figures were in focus late in the European session.

In the week ending 4th June, jobless claims fell from a revised 405k to 376k. Economists had forecast a fall to 370k.

On the inflation front, there was a marked pickup in inflationary pressures mid-way through the 2nd quarter.

The core annual rate of inflation accelerated from 3.0% to 3.8% versus a forecasted 3.4%.

Month-on-month, core consumer prices rose by a further 0.7% following a 0.9% increase in April. Consumer prices rose by 0.6% following a 0.8% increase in April.

Economists had forecast for both consumer and core consumer prices to each rise by 0.4%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. BMW slid by 1.83%, with. Continental and Volkswagen ending the day down by 0.88% and by 0.43% respectively. Daimler avoided the red, however, rising by 0.08%.

It was also a mixed day for the banks. Deutsche Bank fell by 1.67%, while Commerzbank ended the day up by 0.27%.

From the CAC, it was a mixed day for the banks. BNP Paribas fell by 0.25%, while Credit Agricole and Soc Gen rose by 2.40% and by 0.86% respectively.

It was a bearish day for the French auto sector, however. Stellantis NV slid by 2.12%, with Renault falling by 0.42%.

Air France-KLM also struggled, falling by 2.13, with Airbus SE ending the day with a 0.07% loss.

On the VIX Index

It was back into the red for the VIX on Thursday, marking just the 2nd decline in 6 sessions.

Reversing a 4.80% gain from Wednesday, the VIX fell by 10.01% to end the day at 16.10.

The NASDAQ rose by 0.78%, with the Dow and the S&P500 ending the day up by 0.06% and by 0.47% respectively.

VIX 110621 Daily Chart

The Day Ahead

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

Finalized inflation figures for Spain are due out early in the European session. The numbers are unlikely to have a material impact on the European majors, however.

With little else for the markets to consider, further reaction to the ECB press conference is likely ahead of stats from the U.S.

From the U.S, prelim consumer sentiment figures for June will be in focus late in the European session.

A pickup in consumer confidence would support the majors late in the day. Whether the markets can remain calm over yesterday’s stats from the U.s remains to be seen, however.

On the geopolitical risk front, updates from the G7 Summit will also draw interest.

The Futures

In the futures markets, at the time of writing, the Dow Mini was flat.

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