USD Gains Traction Ahead of the NFP

American Traders did what they love to do. They bought the dip and made another V-shape reversal. SP500 and Dow Jones are back above the major supports with handsome buy signals.

The Nasdaq on the other hand is still struggling. Here, a further drop is very probable.

The DAX is flirting with all-time-highs, again

Gold drops after a brilliant head and shoulders pattern. The drop stopped on a mid-term up trendline. This can be a good place to stop this correction.

The EURUSD drops ahead of the NFP data.

This day is important for the USDCAD as we do have labor market data from Canada and the US. The ‘loonie’ tries to bounce from a major long-term horizontal support.

The AUDCHF doing everything to defend the 38,2% Fibo.

The AUDUSD breaks the neckline of the H&S formation and the lower line of the triangle is possibly bearish.

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

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.

European Equities: Service Sector PMIs and U.S Labor Market Data in Focus

Economic Calendar

Thursday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Friday, 4th June

German IHS Markit Construction PMI (May)

Eurozone Retail Sales (MoM) (Apr)

ECB President Lagarde Speaks

The Majors

It was another bullish day for the European majors on Wednesday.

The CAC40 rose by 0.49%, with the DAX30 and the EuroStoxx600 seeing gains of 0.23% and 0.22% respectively.

Disappointing economic data from Germany failed to pull the majors into the red mid-week. Market optimism, following Tuesday’s manufacturing PMIs and unemployment numbers from Germany and the Eurozone, continued to deliver support.

The upside was modest, however, ahead of a busy Thursday and Friday on the economic data front.

The Stats

It was a quieter day on the economic data front. From the Eurozone, German retail sales figures were in focus.

In April, retail sales fell by 5.5%, month-on-month, partially reversing a 7.7% jump from March. Economists had forecast a more modest 2.0% decline.

According to Destatis,

  • The decline in April was attributed to the federal emergency brake in the 2nd half of April and the Easter business in March.
  • Compared with the same month a year earlier, retail sales were up by 4.4%, coming up short of a forecasted 10.1% increase. In March, retail sales had been up by 11.0%, year-on-year.

From the U.S

It was a quiet day on the economic calendar, with no major stats to provide the European markets with direction late in the session.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. Volkswagen rose by 1.93% to lead the way, with BMW and Continental ending the day up by 0.97% and by 0.90% respectively. Daimler saw a more modest 0.41% gain on the day.

It was a mixed day for the banks, however. Deutsche Bank slipped by 0.03%, while Commerzbank gained 1.75%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.51% and by 0.34% respectively, while Credit Agricole fell by 0.59%.

It was a bullish day for the French auto sector, however. Stellantis NV rose by 0.61%, with Renault ending the day up by 1.65%.

Air France-KLM rallied by 3.45%, with Airbus SE gaining 1.78%.

On the VIX Index

Following two consecutive days in the green, it was back into the red for the VIX on Wednesday.

Partially reversing a 6.80% fall from Tuesday, the VIX fell by 2.35% to end the day at 17.48.

The Dow rose by 0.07%, with the NASDAQ and the S&P500 both ending the day up by 0.14% respectively.

VIX 030621 Monthly Chart

The Day Ahead

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

Service sector PMIs for Italy and Spain are due out along with finalized PMI numbers from France, Germany, and the Eurozone.

Barring a marked revision to prelim figures expect Italy, Spain and the Eurozone’s PMIs to draw the greatest interest.

The markets will be looking for Italy’s services sector to return to growth at a minimum…

From the U.S, it’s also a busy day ahead on the economic data front.

Key stats include ADP nonfarm employment change figures, the weekly jobless claims, and market’s favored ISM non-manufacturing PMI.

Other stats include nonfarm productivity and unit labor cost and finalized Markit service PMI numbers. These should have a muted impact on the European majors, however.

Ahead of the European open, Caixin service sector PMI numbers from China will set the tone.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 2 points.

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

European Equities: Economic Data from Germany and Central Bank Chatter in Focus

Economic Calendar

Wednesday, 2nd June

German Retail Sales (MoM) (Apr)

Thursday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Friday, 4th June

German IHS Markit Construction PMI (May)

Eurozone Retail Sales (MoM) (Apr)

ECB President Lagarde Speaks

The Majors

It was bullish day for the European majors on Tuesday, with economic data from the Eurozone delivering support.

The DAX rose by 0.95%, with the CAC40 and the EuroStoxx600 seeing gains of 0.66% and 0.75% respectively.

Economic data from early in the session continued to fuel market optimism over the economic outlook.

Manufacturing sector PMIs from China and the Eurozone and unemployment figures from Germany and the Eurozone were all skewed to the positive.

The ECB’s assurances of unwavering support also limited the impact of a further pickup in inflationary pressure.

The Stats

It was a particularly busy start to the day on the economic data front. From the Eurozone, manufacturing sector PMIs and German unemployment figures influenced.

Unemployment and inflation figures for the Eurozone were also in focus.

Manufacturing Sector PMIs

Member States

In May, Spain’s manufacturing PMI increased from 57.7 to 59.4, with Italy’s PMI rising from 60.7 to 62.3.

Economists had forecast PMIs of 59.5 and 62.0 respectively.

Finalized PMIs from France, Germany, and the Eurozone also drew attention.

Germany’s PMI fell from 66.2 to 64.4, which was up from a prelim 64.0.

France’s manufacturing PMI increased from 58.9 to 59.4, up from a prelim 59.2.

A pickup in manufacturing sector activity in Italy and Spain and upward revisions to French and German PMIs led to an upward revision to the Eurozone’s manufacturing PMI.

The Eurozone

In May, the Eurozone’s manufacturing PMI increased from 62.9 to a new record high 63.1, which was up from a prelim 62.8.

According to the Eurozone’s Markit Survey,

  • All three market groups recorded strong improvements in operating conditions.
  • Investment goods producers were the best performing in May, reporting marked increases in output and new orders.
  • Intermediate goods and consumer goods categories both saw stronger growth.
  • New orders surged off the back of demand across the bloc and from overseas.
  • Sourcing inputs from vendors constrained production activity.
  • Deliveries from suppliers deteriorated at a severe and unprecedented rate in the month.
  • As a result, input costs jumped again, with output prices rising at the fastest pace on record.
  • Firms increased payrolls, with the rate of hiring the most marked since January 2018.
  • Sector optimism remained high, while easing to its lowest level in the last 4-months.

By Country:

  • The Netherlands (69.4) and Austria (66.4) hit new record highs to rank 1st and 2nd.
  • Germany came in 3rd in spite of a 3-month low PMI of 64.4.
  • Ireland (64.1) and Italy (62.3%) also hit record highs to rank 4th and 5th
  • France (248-month high), Spain (276-month high), and Greece (253-month high) sat at the bottom of the rankings.

German Unemployment

Employment figures from Germany were also skewed to the positive.

In May, unemployment fell by 15k, reversing an 8k rise from April. As a result of the fall, the unemployment rate held steady at 6.0%, which was in line with forecasts. Economists had forecast a more modest 9k fall in unemployment, however.

Eurozone Unemployment

In April, the Eurozone’s unemployment rate fell from 8.1% to 8.0%. Economists had forecast the unemployment rate to hold steady at 8.1%.

According to Eurostat,

  • In April 2020, the unemployment rate had stood at 7.3%.
  • In April, 2021, the number of unemployed was up by 1.275m, when compared with April 2020.
  • Compared with March 2021, the number of persons unemployed decreased by 134,000.

Eurozone Inflation

The Eurozone annual rate of inflation is expected to be 2.0% in May 2021, up from 1.6% in April, based on prelim figures.

According to Eurostat,

  • Energy is expected to have the highest annual rate in May, 13.1% compared with 10.4% in April.
  • Services inflation is expected to pick up from 0.9% in April to 1.1% in May.
  • Non-energy industrial goods 0.7% compared with 0.4%.
  • Food, alcohol, & tobacco prices are expected to rise by 0.6% year-on-year, which is stable when compared with April 2021.

From the U.S

It was a relatively quiet day on the economic calendar following Monday’s holiday.

The manufacturing sector was also in focus, with the market’s preferred ISM Manufacturing PMI drawing attention.

In May, the ISM Manufacturing PMI increased from 60.7 to 61.2. Economists had forecast a modest rise to 60.8.

The market survey finalized manufacturing PMI was also out but had a muted impact on the broader markets.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Tuesday. Continental rallied by 4.03% to lead the way, with Volkswagen rising by 3.13%. BMW and Daimler ended the day up by 2.82% and by 2.62% respectively.

It was also a bullish day for the banks. Deutsche Bank rose by 2.51%, with Commerzbank gaining 1.52% on the day.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 1.54% and by 1.24% respectively, with Credit Agricole gaining 2.07%.

It was a relatively bullish day for the French auto sector, however. Stellantis NV and Renault ended the day with modest gains of 0.54% and 0.55% respectively.

Air France-KLM and Airbus SE found strong support, however, rising by 2.75% and by 1.97% respectively.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Tuesday.

Following a 0.12% gain on Friday and Monday’s holiday, the VIX rose by 6.80% to end the day at 17.90.

The Dow eked out a 0.13% gain, while the NASDAQ and the S&P500 ended the day down by 0.09% and by 0.05% respectively.

VIX 020621 Monthly Chart

The Day Ahead

It’s a quieter day ahead on the European economic data front, following Tuesday’s data dump.

The German economy is back in focus, with retail sales for April due out. The markets will be looking for a further pickup in spending to support the optimistic economic outlook.

From the U.S, there are no material stats to provide direction later in the day.

The lack of stats will likely leave the European majors in the hands of central bank chatter late in the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 21 points.

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

Indices and Commodities Continue the Bull Run

 

The new week – with the US market starting on Tuesday due to Labor Day – is starting on the front foot with all the major indices climbing significantly higher.

The DAX broke the upper line of the pennant formation and is heading north with high momentum.

Gold is still climbing inside a big channel up formation. The price will most probably hit the 1960 USD/oz pretty soon.

Brent Oil is breaking the psychological barrier of 70 USD/bbl at the time of writing.

The EURUSD has fully recovered after a false bearish breakout of the mid-term up trendline which started on Friday.

The USDCAD broke the lower line of the pennant formation and all this is happening on a major, long-term support.

The AUDCHF tried to break the short-term horizontal resistance in order to create a bigger bounce from the 38,2% Fibonacci.

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

European Equities: A Busy Economic Calendar to Drive the Majors

Economic Calendar

Tuesday, 1st June

Spanish Manufacturing PMI (May)

Italian Manufacturing PMI (May)

French Manufacturing PMI (May) Final

German Manufacturing PMI (May) Final

Eurozone Manufacturing PMI (May) Final

Eurozone Unemployment Rate (Apr)

German Unemployment Change (May)

German Unemployment Rate (May)

Eurozone CPI (YoY) (May) Prelim

ECB President Lagarde Speaks

Wednesday, 2nd June

German Retail Sales (MoM) (Apr)

Thursday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Friday, 4th June

German IHS Markit Construction PMI (May)

Eurozone Retail Sales (MoM) (Apr)

ECB President Lagarde Speaks

The Majors

It was relatively bearish start to the week for the European majors on Monday.

The CAC40 and the EuroStoxx600 fell by 0.57% and by 0.49% respectively, with DAX30 declining by 0.64%.

With the UK and the U.S markets closed, there was little for the markets to consider other than prelim inflation figures.

A continued pickup in inflationary pressures pegged the majors back. The downside was limited, however, following assurances from the ECB that there would be no tapering to the asset purchasing program.

For the ECB, however, the bigger question will be at what point will a tapering be needed should inflationary pressures fail to abate.

The Stats

Economic data from the Eurozone was on the busier side this morning with prelim inflation figures for Germany and Italy were in focus.

In May, German consumer prices increased by 0.5%, following a 0.7% rise in April. Economists had forecast a 0.5% rise.

According to Destatis,

  • Year-on-year, the annual rate of inflation accelerated from 2.0% to 2.5%.
  • Prices for goods rose by 3.1%, driven by a 10.0% jump in energy prices.
  • Food prices increased by a modest 1.5%, while prices for services increased by 2.2%.

From Italy, consumer prices held steady in May, following on from a 0.4% increase in April. Economists had forecast a 0.4% rise.

According to istat.it,

  • While stalling in the month of May, the annual rate of inflation ticked up from 1.1% to 1.3%.
  • Prices of energy products jumped by 13.8%, supporting the pickup in the annual rate of inflation.

Inflation figures from Spain were also out but had a muted impact on the majors. Spain’s annual rate of inflation accelerated from 2.2% to 2.7% in May, according to prelim figures.

From the U.S

There were no major stats to consider, with the U.S markets closed at the start of the week.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Continental fell by 1.12% to lead the way down, with BMW and Daimler ending the day down by 0.43% and by 0.72% respectively. Volkswagen bucked the trend, however, gaining 0.93%.

It was a bearish day for the banks. Deutsche Bank slid by 2.12%, with Commerzbank falling by 0.32%. Reports that the U.S Federal Reserve had pointed out a continued failure to address AML control issues left Deutsche Bank in the deep red.

From the CAC, it was a bearish day for the banks. Credit Agricole and Soc Gen fell by 0.81% and by 0.17% respectively, with BNP Paribas declining by 1.12%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.94%, while Renault ended the day down by 0.85%.

Air France-KLM and Airbus SE saw losses of 0.17% and 1.24% respectively.

On the VIX Index

There was no trading, with the U.S markets closed for Memorial Day.

The Day Ahead

It’s a particularly busy day ahead on the European economic data front. Manufacturing sector PMI numbers from Spain and Italy are due out along with unemployment numbers from Germany and the Eurozone.

Finalized manufacturing PMIs are also due out for France, Germany, and the Eurozone.

Barring any marked revision from prelim PMIs, expect Italy and the Eurozone’s manufacturing PMIs and Germany’s unemployment figures to be key.

Prelim inflation figures and unemployment numbers for the Eurozone will also draw attention.

From the U.S, the market’s preferred ISM Manufacturing PMI will also provide direction late in the day.

Ahead of the European open, China’s Caixin Manufacturing PMI will set the tone.

Away from the economic data, expect FOMC member chatter and updates from Capitol Hill to also influence later in the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 28 points.

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

European Equities: A Month in Review – May 2021

The Majors

It was yet another bullish month for the European majors in May, logging a 4th consecutive monthly gain.

The CAC40 rose by 2.83% to lead the way, with the DAX30 and EuroStoxx600 gaining 1.88% and 2.11% respectively.

After a bearish start to the year, with January having delivered heavy losses, the CAC40 was up 16.14% year-to-date. The DAX30 and EuroStoxx600 weren’t far behind, with year-to-date gains of 12.41% and 11.96% respectively.

Economic data and continued assurances from the ECB of unwavering support delivered the upside in May.

Market optimism towards the economic outlook, as the EU began to reopen for tourism also drove the major markets northwards.

The Stats

It was a busy month on the Eurozone economic calendar.

While 1st quarter GDP figures for Germany and France disappointed, private sector PMIs continued to impress.

The markets were able to stomach softer manufacturing numbers, with the services sector seeing a marked pickup in growth.

According to prelim figures for May, the Eurozone’s services PMI jumped from 50.5 to 55.1, while the manufacturing PMI slipped from 62.9 to 62.8.

Consumer and business confidence was also on the rise in response to the reopening of economies across the EU.

The pickup in both business and consumer confidence was aligned with market optimism towards the economic outlook.

In May, Germany’s IFO Business Climate Index rose from 96.6 to 99.2, with the GfK Consumer Climate Index climbing from -8.6 to -7.0 for June.

Confidence was also on the rise in France.

Inflation figures did influence in the month, however, with inflation accelerating across the Eurozone.

According to prelim figures, Germany’s annual rate of inflation ticked up from 2.0% to 2.5%. Italy also experienced a pickup in inflationary pressures, as did France and Spain.

Assurances from the ECB that there would be no tapering to the asset purchasing program limited the damage, however.

From the U.S

Economic data was also skewed to the positive in the month.

Key through the month was a downward trend in the weekly jobless claims.

After having fallen to sub-500k levels in the week ending 30th April, claims fell to 406k in the week ending 21st May.

April core durable goods and 1st quarter GDP numbers also delivered support, as did a marked increase in service sector activity.

According to prelim figures, the Markit Services PMI increased from 64.7 to 70.1 in May.

A pickup in inflationary pressure did test the markets, however. The FED’s preferred Core PCE Price Index jumped by 3.1% year-on-year in April. In March, the index had increased by a more modest 1.9%.

Following assurances from the FED Chair that there would be no tapering to the asset purchasing program, the latest FOMC minutes revealed that members were willing to begin discussing a possible tapering in the coming months.

Over the course of the month, FOMC members voiced similar sentiment. In spite of the FED’s likely shift, however, market optimism towards the economic outlook limited the impact on the European majors.

The Market Movers

For the DAX: It was a bullish month for the auto sector in May. Continental rallied by 6.73%, with Volkswagen and BMW seeing gains of 5.28% and 4.07% respectively. Daimler ended the month with a more modest 2.77% gain.

It was another bullish month for the banks. Deutsche Bank rose by 4.04%, with Commerzbank jumping by 20.22%.

From the CAC, it was a mixed month for the banking sector. Soc Gen led the way once more, however, rallying by 10.69%, with BNP Paribas gaining 4.61%. Credit Agricole bucked the trend, however, sliding by 5.21%.

It was also a bullish month for the auto sector. Renault and Stellantis NV ended the month up by 0.89% and by 17.71% respectively.

Air France-KLM slipped by 0.22%, while Airbus SE rose by 6.72%.

While economic data and a reopening of economies provided direction, corporate earnings were also in play early in the month.

On the VIX Index

It was a 4th consecutive month in the red for the VIX in May, delivering a 6th monthly decline in 9-months.

Following on from a 4.07% decline in April, the VIX fell by 9.94% to end the month at 16.76.

In April, the NASDAQ fell by 1.53%, while the Dow and the S&P500 ended the month up by 1.93% and by 0.55% respectively.

VIX 010621 Monthly Chart

The Month Ahead

Following a string of impressive numbers from the Eurozone and China, we can expect continued focus on key stats.

While private sector PMIs, employment, and consumption will remain key drivers, inflation will also remain a key area of focus.

A continued uptick in inflationary pressures will bring into question assurances from the ECB doves.

From the U.S, the FED talked of a willingness to begin tapering its asset purchasing program. Much, however, will depend on inflation, consumption, and labor market conditions.

We could see more than a taper tantrum should economic indicators glow red hot.

Expect private sector PMI and trade figures from China to also influence along with spending plan chatter from Brussels and Capitol Hill.

European Equities: Member State Inflation Figures for May in Focus

Economic Calendar:

Monday, 31st May

Spanish HICP (YoY) (May) Prelim

Italian CPI (MoM) (May) Prelim

German CPI (MoM) (May) Prelim

Tuesday, 1st June

Spanish Manufacturing PMI (May)

Italian Manufacturing PMI (May)

French Manufacturing PMI (May) Final

German Manufacturing PMI (May) Final

Eurozone Manufacturing PMI (May) Final

Eurozone Unemployment Rate (Apr)

German Unemployment Change (May)

German Unemployment Rate (May)

Eurozone CPI (YoY) (May) Prelim

ECB President Lagarde Speaks

Wednesday, 2nd June

German Retail Sales (MoM) (Apr)

Thursday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Friday, 4th June

German IHS Markit Construction PMI (May)

Eurozone Retail Sales (MoM) (Apr)

ECB President Lagarde Speaks

The Majors

It was relatively bullish end to the week for the European majors on Friday.

The CAC40 and the DAX30 rose by 0.75% and by 0.74% respectively, with EuroStoxx600 gaining 0.57%.

Economic data from the Eurozone and the U.S took a back seat on Friday, in spite of a marked jump in U.S inflation.

Assurances from the ECB of status quo on the monetary policy front and optimism towards the economic outlook remained the key driver.

With the EU member states reopening borders for tourists, hopes are for a sharp rebound in economic growth through the 2nd half of the year. The easing of lockdown measures would support consumption and a further pickup in private sector activity.

From the U.S, U.S President Biden’s spending plan added the market optimism on the day.

The Stats

Economic data from the Eurozone was on the busier side this morning with the French economy in focus.

1st Quarter GDP

In the 1st quarter, the French economy contracted by 0.1% quarter-on-quarter, revised down from a prelim 0.4% expansion. In the 4th quarter, the economy had contracted by 1.5%.

According to Insee.Fr,

  • Households’ consumption expenditure rose by a modest 0.1% after having tumbled by 5.6% in Q42020. Compared with the final quarter before the pandemic, however, consumption was down 6.8%.
  • Gross fixed capital formation (GFCF) increased by 0.2% after having fallen by 1.7% in the previous quarter. In the 4th quarter of 2020, GFCF had risen by 1.7%.
  • Trade had a negative impact on GDP, with imports up 1.1%, while exports fell by 0.2%. Compared with the pre-crisis 4th quarter of 2019, imports were down 6.9%, with exports down 9.9%.

Household Consumption

In April 2021, consumer spending tumbled by 8.3%, month-on-month, versus a forecasted 0.4% increase. Consumer spending had fallen by 0.3% in March.

According to Insee.Fr,

  • The slide was mainly due to an 18.9% slump in spending on manufactured goods, attributed to the 3rd lockdown in April.
  • Energy expenditure fell by a modest 0.6%, with food consumption declining by 0.2%.
  • Spending was 9.5% below its average level in Q4 2019.

Inflation

According to prelim figures, the annual rate of inflation picked up from 1.2% to 1.4% in May. Month-on-month, consumer prices increased by 0.3%, following a 0.1% rise in April.

According to Insee.Fr,

  • An acceleration in energy prices supported the pickup in inflationary pressure in May. Year-on-year, energy prices jumped by 11.8%.
  • Prices for manufactured goods were estimated to be stable, while food prices are expected to decline. Food prices are estimated to fall by 0.2%.

From the U.S

At the end of the week, the focus shifted to inflation, personal spending, and consumer sentiment.

In May, personal spending rose by a more modest 0.5% after a 4.7% jump in April.

Inflationary pressures were on the rise, however, with the Core PCE Price Index rising by 0.7% in April. In the month of March, the Index had risen by 0.4%.

Year-on-year, the index jumped by 3.1% coming in ahead of a forecasted 2.9%. In April, the index had risen by 1.9%, year-on-year.

Finalized consumer sentiment figures affirmed a decline from April.

In May, the Michigan Consumer Sentiment Index fell from 88.3 to 82.9, which was up from a prelim 82.8.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Daimler fell by 1.22% to lead the way down, with BMW and Volkswagen ending the day with losses of 0.34% and 0.27% respectively. Continental bucked the trend, however, rising by 0.18%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.73%, while Commerzbank fell by 0.24%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 0.16% and by 0.36% respectively, with Credit Agricole gaining 1.52%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.17%, while Renault ended the day down by 0.25%.

Air France-KLM and Airbus SE saw gains of 2.61% and 1.24% respectively.

On the VIX Index

It was back into the green after 2 consecutive days in the red for the VIX on Friday.

Following a 3.57% decline on Thursday, the VIX rose by 0.12% to end the day at 16.76.

The NASDAQ eked out a 0.09% gain, with the Dow and the S&P500 ending the day up by 0.19% and by 0.08% respectively.

VIX 310521 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the European economic data front. Prelim inflation figures for Spain, Italy, and Germany are due out later today.

With the markets expecting a continued pickup in inflationary pressures only a marked increase would test support for the majors.

Ahead of the European open, NBS private sector PMI figures from China will set the tone.

Later in the European session, volumes will be on the lighter side with the U.S markets closed at the start of the week.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 49 points.

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

The Week Ahead – A Particularly Busy Economic Calendar and Central Bank Chatter in Focus

On the Macro

It’s a particularly busy week ahead on the economic calendar, with 79 stats in focus in the week ending 4th June. In the week prior, 41 stats had been in focus.

For the Dollar:

ISM Manufacturing and Non-Manufacturing numbers on Tuesday and Thursday will be key.

Expect the ISM Non-Manufacturing PMI to be the key driver on Thursday.

Ahead of nonfarm payroll figures on Friday, the ADP nonfarm and weekly jobless claims figures will also influence on Thursday.

At the end of the week, expect plenty of interest in May’s NFP numbers. A sizeable increase is going to be needed following disappointing numbers for April.

On the monetary policy front, FOMC member chatter will also need monitoring. FED Chair Powell is also scheduled to speak on Friday.

From Capitol Hill, U.S President Biden’s spending plans will also be in focus.

In the week, the Dollar ended the week up by 0.02% to 90.031.

For the EUR:

It’s a busier week on the economic data front.

Private sector PMIs for Italy and Spain are due out on Tuesday and Thursday. Finalized PMIs for France, Germany, and the Eurozone are also due out.

Barring any material revisions, expect Italy and the Eurozone’s numbers to be key.

Through the week, prelim inflation figures for the Eurozone and member states and retail sales and unemployment figures from Germany will also influence.

Wrapping things up at the end of the week will be retail sales figures for the Eurozone.

The EUR ended the week up by 0.08% to $1.2192.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

Finalized private sector PMIs for May are due out along with construction PMI figures.

Expect any revision to the services PMI to be key on Thursday.

The Pound ended the week up by 0.27% to $1.4188.

For the Loonie:

It’s a particularly busy week ahead on the economic calendar.

Early in the week, RMPI and GDP numbers will influence on Monday and Tuesday.

At the end of the week, employment change and Ivey PMI numbers will also draw interest.

While the numbers will provide the Loonie with direction, expect private sector PMIs from key economies to also provide direction.

The Loonie ended the week down 0.08% to C$1.2076 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week ahead.

Early in the week, private sector credit, manufacturing, and company gross operating profit figures will be in focus.

The focus will then shift to key stats in the 2nd half of the week.

1st quarter GDP numbers on Thursday and retail sales and trade data on Friday will provide direction.

On the monetary policy front, the RBA is also in action on Tuesday, however…

The Aussie Dollar ended the week down by 0.26% to $0.7712.

For the Kiwi Dollar:

It’s a quieter week ahead.

Business confidence and building consent figures are due out on Monday and Tuesday. Expect business confidence figures for May to be key on Monday.

The Kiwi Dollar ended the week up by 1.06% to $0.7250.

For the Japanese Yen:

It is a relatively busy week ahead.

Industrial production and retail sales figures get things going on Monday. Both sets of numbers will draw interest.

On Tuesday, capital spending numbers for the 1st quarter will also influence.

At the end of the week, expect household spending numbers to also provide direction.

Finalized private sector PMIs for May are also due out. Barring revisions to prelim figures, however, these should have a muted impact on the Yen,

The Japanese Yen fell by 0.82% to ¥109.85 against the U.S Dollar.

Out of China

It’s also a busy week ahead.

Private sector PMIs for May are due out. While the NBS figures on Monday will draw interest, the market’s favored Caixin PMIs on Tuesday and Thursday will be key.

There have been some disappointing stats from China in recent weeks. Weaker private sector activity would test support for riskier assets.

The Chinese Yuan ended the week up by 1.02% to CNY6.3685 against the U.S Dollar.

Geo-Politics

There are no major risks to consider in the week ahead.

As always, however, the markets will need to continue monitoring chatter from Capitol Hill and Beijing. There’s also the run up to the elections in Iran to keep an eye on.

The Weekly Wrap – Economic Data and Central Bank Chatter Influenced in the Week

The Stats

It was a quieter week on the economic calendar, in the week ending 28th May.

A total of 41 stats were monitored, following 69 stats from the week prior.

Of the 41 stats, 25 came in ahead forecasts, with 14 economic indicators coming up short of forecasts. There were 2 stats that were in line with forecasts in the week.

Looking at the numbers, 25 of the stats reflected an upward trend from previous figures. Of the remaining 16 stats, 13 reflected a deterioration from previous.

For the Greenback, economic data from the U.S and FOMC chatter continued to be the main area of focus. In the week ending 28th May, the Dollar Spot Index rose by 0.02% to 90.031. In the previous week, the Dollar had fallen by 0.32% to 90.029.

Out of the U.S

Key stats through the week included consumer confidence, jobless claims and core durable goods orders.

The stats were mixed ahead of a busier Friday.

Consumer confidence weakened marginally in May, with 2nd estimate GDP numbers for the 1st quarter aligned with first estimates.

On the positive, however, was a slide in the weekly jobless claims from 444k to 406k.

A further 1.0% increase in core durable goods orders, following a 3.2% jump in March, was also positive.

At the end of the week, the focus shifted to inflation, personal spending, and consumer sentiment.

In May, personal spending rose by a more modest 0.5% after a 4.7% jump in April.

Inflationary pressures were on the rise, however, with the Core PCE Price Index rising by 0.7% in April. In the month of March, the Index had risen by 0.4%.

Year-on-year, the index jumped by 3.1% coming in ahead of a forecasted 2.9%. In April, the index had risen by 1.9%, year-on-year.

Finalized consumer sentiment figures affirmed a decline from April.

In May, the Michigan Consumer Sentiment Index fell from 88.3 to 82.9, which was up from a prelim 82.8.

On the monetary policy front, FOMC member chatter affirmed comments from the minutes of a willingness to consider a tapering to the asset purchasing program.

In the equity markets, the NASDAQ rose by 2.06%, with the Dow and the S&P500 seeing gains of 0.94% and 1.16% respectively.

Out of the UK

It was a particularly quiet week, with no major stats to provide the Pound with direction in the week.

A lack of stats left the Pound in the hands of the UK government’s ongoing reopening plans and the optimistic economic outlook.

In the week, the Pound rose by 0.27% to end the week at $1.4188. In the week prior, the Pound had risen by 0.38% to $1.4150.

The FTSE100 ended the week up by 0.06%, following a 0.36% decline from the previous week.

Out of the Eurozone

Early in the week, the German economy was in focus.

In the 1st quarter, the German economy contracted by more than had been expected. Quarter-on-quarter, the economy contracted by 1.8%, revised down from a prelim 1.7%. Year-on-year, the economy contracted by 3.3%, which was revised down from a prelim 3.3% contraction.

Offsetting the effects of the downward revisions, however, were improved consumer and business sentiment.

The IFO Business Climate Index rose from 96.6 to 99.2, with the GfK Consumer Climate rising from -8.6 to -7.0.

At the end of the week, the French economy was in focus.

In the 1st quarter, the French economy contracted by 0.1% quarter-on-quarter, revised down from a prelim 0.4% expansion. In the 4th quarter, the economy had contracted by 1.5%.

Household spending also disappointed. In April 2021, consumer spending tumbled by 8.3%, month-on-month, versus a forecasted 0.4% increase. Consumer spending had fallen by 0.3% in March.

Inflationary pressures were on the rise, however. According to prelim figures, the annual rate of inflation picked up from 1.2% to 1.4% in May. Month-on-month, consumer prices increased by 0.3%, following a 0.1% rise in April.

For the week, the EUR rose by 0.08% to $1.2192. In the week prior, the EUR had risen by 0.34% to $1.2182.

The DAX30 rose by 0.53%, with CAC40 and the EuroStoxx600 ending the week up by 1.53% and by 1.02% respectively.

For the Loonie

It was a particularly quiet week. There were no major stats to provide the Loonie with direction in the week.

A lack of stats left the Loonie in the hands of crude oil inventory numbers and market risk sentiment.

Rising crude oil prices delivered support to prevent a reversal of the previous week’s gain.

In the week ending 28th May, the Loonie slipped by 0.08% to C$1.2076. In the week prior, the Loonie had risen by 0.31% to C$1.2066.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 28th May, the Aussie Dollar fell by 0.26% to $0.7712, while the Kiwi Dollar ended the week up by 1.06% to $0.7250.

For the Aussie Dollar

It was a quiet week.

Construction work done and private new CAPEX figures for the 1st quarter were in focus.

The stats were skewed to the positive but were not good enough to prevent a Friday fall into the red.

Construction work done rose by 2.4%, reversing a 0.9% decline from the 4th quarter of last year.

Private sector credit jumped by 6.3% following a 3.0% rise in the 4th quarter of last year.

For the Kiwi Dollar

It was a busy week.

At the start of the week, 1st quarter retail sales figures impressed. Quarter-on-quarter, retail sales rose by 2.5%, with core retail sales up by 3.2%. In the 4th quarter, retail sales and core retail sales had fallen by 2.7% and by 2.9% respectively.

Mid-week, trade data delivered mixed results, however.

Month-on-month, the trade surplus widened from NZ$39m to NZ$388m. Year-on-year, however, the surplus narrowed from NZ$1,700m to NZ$730m.

With the RBNZ in action on Wednesday, the trade data had a muted impact on the Kiwi.

A more hawkish than expected outlook on monetary policy delivered the upside for the Kiwi.

The RBNZ rate statement revealed that the cash rate could be on the rise as early as the final quarter of 2022.

For the Japanese Yen

It was a quieter week.

The markets had to wait until Friday for inflation figures.

In May, Tokyo’s core annual rate of inflation held steady at -0.2%, which was in line with forecasts.

Month-on-month, consumer prices ex food and energy remained unchanged after a 0.4% fall in April.

The stats had a muted impact on the Japanese Yen, however, which was under pressure in the week.

The Japanese Yen fell by 0.82% to ¥109.85 against the U.S Dollar. In the week prior, the Yen had risen by 0.36% to ¥108.96.

Out of China

It was a particularly quiet week on the data front.

There were no major stats to influence market risk appetite in the week.

In the week ending 28th May, the Chinese Yuan rose by 1.02% to CNY6.3685. In the week prior, the Yuan had fallen by 0.05% to CNY6.4340.

The CSI300 rallied by 3.64%, with the Hang Seng ending the week up by 2.34%.

European Equities: A Week in Review – 28/05/21

The Majors

It was another choppy week for the European majors in the week ending 28th May.

In the week ending 28th May, the CAC40 rose by 1.53%, with the EuroStoxx600 and the DAX30 ending the week up by 1.02% and 0.53% respectively.

Economic data from the Eurozone and the U.S and updates from the ECB of no plans to consider a tapering to the asset purchasing program delivered support.

The upside came in spite of FOMC member acknowledging a willingness to begin discussions on a tapering to their asset purchasing program.

Ultimately, market optimism towards the economic outlook prevailed as EU member states reopen borders for tourism.

The Stats

Early in the week, the German economy was in focus.

In the 1st quarter, the German economy contracted by more than had been expected. Quarter-on-quarter, the economy contracted by 1.8%, revised down from a prelim 1.7%. Year-on-year, the economy contracted by 3.3%, which was revised down from a prelim 3.3% contraction.

Offsetting the effects of the downward revisions, however, were improved consumer and business sentiment.

The IFO Business Climate Index rose from 96.6 to 99.2, with the GfK Consumer Climate rising from -8.6 to -7.0.

At the end of the week, the French economy was in focus.

In the 1st quarter, the French economy contracted by 0.1% quarter-on-quarter, revised down from a prelim 0.4% expansion. In the 4th quarter, the economy had contracted by 1.5%.

Household spending also disappointed. In April 2021, consumer spending tumbled by 8.3%, month-on-month, versus a forecasted 0.4% increase. Consumer spending had fallen by 0.3% in March.

Inflationary pressures were on the rise, however. According to prelim figures, the annual rate of inflation picked up from 1.2% to 1.4% in May. Month-on-month, consumer prices increased by 0.3%, following a 0.1% rise in April.

From the U.S

Key stats through the week included consumer confidence, jobless claims and core durable goods orders.

The stats were mixed ahead of a busier Friday.

Consumer confidence weakened marginally in May, with 2nd estimate GDP numbers for the 1st quarter aligned with first estimates.

On the positive, however, was a slide in the weekly jobless claims from 444k to 406k.

A further 1.0% increase in core durable goods orders, following a 3.2% jump in March, was also positive.

At the end of the week, the focus shifted to inflation, personal spending, and consumer sentiment.

In May, personal spending rose by a more modest 0.5% after a 4.7% jump in April.

Inflationary pressures were on the rise, however, with the Core PCE Price Index rising by 0.7% in April. In the month of March, the Index had risen by 0.4%.

Year-on-year, the index jumped by 3.1% coming in ahead of a forecasted 2.9%. In April, the index had risen by 1.9%, year-on-year.

Finalized consumer sentiment figures affirmed a decline from April.

In May, the Michigan Consumer Sentiment Index fell from 88.3 to 82.9, which was up from a prelim 82.8.

On the monetary policy front, FOMC member chatter affirmed comments from the minutes of a willingness to consider a tapering to the asset purchasing program.

The Market Movers

From the DAX, it was another bullish week for the auto sector. Continental and Volkswagen rallied by 4.15% and by 4.80% respectively, with BMW and Daimler rising by 2.29% and by 1.73% respectively.

It was also a bullish week for the banking sector. Deutsche Bank and Commerzbank ended the week with gains of 2.49% and 1.85% respectively.

From the CAC, it was a relatively bullish week for the banks. Soc Gen rose by 0.04%, with BNP Paribas and Credit Agricole seeing gains of 0.43% and 0.16% respectively.

It was a bullish week for the French auto sector. Stellantis NV and Renault rallied by 5.28% and by 4.82% respectively.

Air France-KLM ended the week up by 3.58%. Airbus led the way, however, surging by 10.31%. The upside came off the back of news of plans to ramp up aircraft production.

On the VIX Index

It was back into the red after 2 consecutive weeks in the green for the VIX in the week ending 28th May. Reversing a 7.12% gain from the week prior, the VIX fell by 16.82% to end the week at 16.76.

3-days in the red from 5 sessions, which included an 8.68% fall on Monday and a 7.86% decline on Wednesday delivered the downside in the week.

For the week, the NASDAQ rose by 2.06%, with the Dow and the S&P500 ending the week up by 0.94% and by 1.16% respectively.

VIX 290521 Weekly Chart

The Week Ahead

It’s a busier week ahead on the economic calendar.

Private sector PMIs are due out on Tuesday and Thursday. Barring a marked revision to prelim numbers from France and Germany, the Eurozone and Italy’s PMIs would likely be key.

Early in the week, German retail sales and unemployment figures Germany and the Eurozone will also influence.

At the end of the week, retail sales for the Eurozone wrap things up.

From the U.S, ISM private sector PMIs, ADP nonfarm employment change, and weekly jobless claims figures will draw interest ahead of May’s nonfarm payroll figures on Friday.

The markets will be looking for a continued pickup in private sector activity and a continued improvement in labor market conditions.

From elsewhere, private sector PMI numbers from China will also influence. Expect the market’s preferred Caixin Manufacturing PMI to be the key driver on Tuesday.

On the monetary policy front, ECB and FOMC member chatter will also need monitoring in the week.

European Equities: Economic Data from France and the U.S in Focus

Economic Calendar:

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 relatively bullish day for the European majors on Thursday.

The CAC40 led the way, rising by 0.69%, with the DAX30 and EuroStoxx600 gaining 0.28% and 0.24% respectively.

Economic data from Germany and the U.S delivered support to the majors, with a continued decline in U.S jobless claims key.

The Stats

Economic data from the Eurozone included consumer sentiment figures from Germany.

For June, the GfK is forecasting consumer confidence to rise from -8.6 to -7, based on the findings for May. Economists had forecast an increase to -5.2.

According to the latest GfK survey,

  • The economic expectations indicator surged by 41.1 points to its highest level in more than 3-years in May.
  • Supported by the sharp rise in the economic outlook, income expectations increase by 19.5 points in May. Compared with the same period of the previous year, income expectations were up more than 25 points.
  • Propensity to buy, however, fell for the first time in 4-months, falling by 7.3 points to 10 points. In spite of the decline, this was still 4.5 points higher than the same month a year earlier.

From the U.S

It was a busier day on the economic calendar.

Key stats included core durable goods, 2nd estimate GDP, and weekly jobless claims figures.

In the 1st quarter, the U.S economy expanded by 6.4%, which was in line with 1st estimates. Economists had forecast an upward revision to 6.5%.

Core durable goods rose by a further 1,0%, following a 3.2% increase in March. Economists had forecast a 0.8% rise.

Labor market conditions continued to improve. In the week ending 21st May, initial jobless claims fell from 444k to 406k. Economists had forecast a decrease to 425k.

While the major stats were skewed to the positive, an unexpected fall in durable goods orders disappointed.

In April, durable goods orders fell by 1.3%, reversing a 1.3% rise from March. Economists had forecast a 0.7% increase in orders.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Volkswagen rallied by 2.04% to lead the way, with BMW and Continental rising by 1.24% and by 1.97% respectively. Daimler ended the day with a more modest 0.21% gain.

It was also a bullish day for the banks. Deutsche Bank rose by 0.46%, with Commerzbank rallying by 2.72%.

From the CAC, it was also a bullish day for the banks. BNP Paribas and Soc Gen ended the day up by 3.18% and by 2.97% respectively. Credit Agricole rose by 1.19%.

It was a bullish day for the French auto sector. Stellantis NV and Renault ended the day with solid gains of 3.80% and 2.78% respectively.

Air France-KLM rose by 1.16%, while Airbus SE jumped by 9.22%, the upside coming off the back of a planned ramp up in aircraft production.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday, marking a 5th day in the red from 6 sessions.

Following a 7.86% decline on Wednesday, the VIX fell by 3.57% to end the day at 16.74.

The NASDAQ slipped by 0.01%, while the Dow and the S&P500 ended the day up by 0.41% and by 0.12% respectively.

VIX 280521 Daily Chart

The Day Ahead

It’s another busy day ahead on the European economic calendar. From the Eurozone, French consumer spending, finalized GDP, and prelim inflation figures will be in focus.

Barring a marked revision to the GDP numbers, expect consumer spending and inflation to be the key drivers.

From the U.S, inflation, personal spending, and consumer sentiment figures will influence later in the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 169 points.

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

European Equities: Economic Data from Germany and the U.S in Focus

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 another mixed day for the European majors on Wednesday.

The the DAX30 slipped by 0.09%, while the CAC40 and EuroStoxx600 eked out gains of 0.02% and 0.03% respectively.

With economic data on the lighter side, chatter from FOMC members of a willingness to begin considering a tapering to the asset purchasing program pegged the majors back.

In contrast, however, assurances from the ECB that it’s too early to begin considering any such tapering delivered support.

A pickup in both French business and consumer confidence added support for the CAC40.

The Stats

Economic data from the Eurozone included business and consumer confidence figures from France.

The Business Climate Survey Indicator for manufacturing rose from 104 to 107 in May. Economists had forecast an increase to 106.0.

According to Insee.Fr,

  • The increase was attributed to a rise in the balances of opinion on production prospects and order books.
  • Across the services sector, the business climate index climbed from 92 to 107.
  • For the retail sector, the climb was a more impressive 17 points to 107. The jump was driven by sentiment towards the near future, likely to be due to the reopening of the economy.
  • Employment conditions also improved, with the employment climate rising from 92 to 100.

Consumer confidence also improved, with the consumer confidence indicator rising from 95 to 97 in May. Economists had forecast an increase to 97.

According to Insee.Fr,

  • Household confidence in the economic situation remained below its long-term average of 100.
  • In relation to their future financial situation, the households’ opinion balance rose by 3 points to go above its long run average.
  • The share of households considering it to be a suitable time to make major purchases remained steady and remained above its long-term average.
  • In relation to households considering it a suitable time to save, the share declined after hitting an all-time high in April.

From the U.S

There were no material stats to provide the European majors with direction late in the day.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. Daimler rose by 1.10% to lead the way, with BMW and Continental up by 0.67% and by 0.47% respectively. Volkswagen ended the day with a more modest 0.18% gain.

It was a mixed day for the banks. Deutsche Bank rose by 0.53%, while Commerzbank slid by 2.21%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole ended the day down by 1.35% and by 1.14% respectively. Soc Gen led the way down, however, falling by 2,12%.

It was a relatively bullish day for the French auto sector, however. Stellantis NV and Renault ended the day with gains of 0.01% and 0.65% respectively.

Air France-KLM fell by 1.33%, while Airbus SE rose by 0.55%.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking a 4th day in the red from 5 sessions.

Reversing a 2.39% rise from Tuesday, the VIX fell by 7.91% to end the day at 17.35.

The NASDAQ rose by 0.59%, with the Dow and the S&P500 ending the day with modest gains of 0.03% and by 0.19% respectively.

VIX 270521 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the European economic calendar. From the Eurozone, German consumer sentiment figures are due out ahead of the European open.

Following the pickup in business sentiment, the markets will be looking for consumer confidence to support a positive outlook on spending.

From the U.S, 2nd estimate GDP, core durable goods, and the weekly jobless claims figures will also provide direction later in the day.

On the monetary policy front, chatter from central bankers will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 8 points.

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

DAX 30 Testing 38.2% Fib Support in ABC Correction

The German stock index DAX 30 made a bullish bounce within wave E (orange) as expected. This completed a wave 4 (grey) pattern and restarted the uptrend.

Can the bulls keep control or is the uptrend already completed? Let’s review the Elliott Wave patterns.

Price Charts and Technical Analysis

DAX 26.5.2021 4 hour chart

The DAX 30 made a strong bullish breakout above the 21 ema zone:

  1. The breakout seems to be a wave 3 (orange) if price action is able to make a bounce at the 21 ema zone.
  2. A bullish bounce around the 21 emas could indicate a wave 4 (orange).
  3. The waves 4 are usually complex and lengthy so a bearish ABC (blue) pattern is typical.
  4. A bearish bounce (orange arrow) at the previous top could indicate a wave B-C (blue).
  5. A bullish bounce at the previous bounce could restart the uptrend (blue arrow).
  6. A deep retracement invalidates this wave outlook (red circle).

On the 1 hour chart, price action seems to be developing a bearish ABC (green) pattern:

  1. A bearish push towards the 38.2% Fibonacci retracement level could complete wave C (green) of wave A (blue).
  2. The outlook remains bullish as long as price action stays above the 50% FIbonacci level.
  3. A deep bearish retracement could indicate a different wave outlook (red and orange circles).
  4. The main targets are located at the -27.2% Fibonacci level around $15,743 and the -61.8% Fibonacci target at $15,918.

DAX 26.5.2021 1 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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

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.

German Business Morale Improves More Than Expected to 2-year High

By Michael Nienaber

The Ifo institute said its business climate index rose to 99.2 from a revised 96.6 in April. A Reuters poll of analysts had pointed to a smaller increase to 98.2.

“The German economy is picking up speed,” Ifo President Clemens Fuest said in a statement.

The survey among some 9,000 firms in manufacturing, the service sector, trade and construction showed that businesses were more satisfied with their current situation and that they were also more optimistic regarding the coming six months.

Ifo economist Klaus Wohlrabe told Reuters in an interview that the survey data pointed to a quarterly growth rate of 2.6% from April to June and 2.8% from July to September.

KfW bank economist Fritzi Koehler-Geib said she also expected very strong growth in the second half of the year thanks to catch-up effects in services and an easing of input bottlenecks in manufacturing.

“We have therefore revised our economic forecast for 2021 upwards to 3.5% today, despite the poor start to the year,” Koehler-Geib said.

Detailed gross domestic product data released earlier on Tuesday showed that the German economy shrank more than expected in the first quarter as coronavirus curbs spurred consumers to put more money than ever into savings.

(Reporting by Michael Nienaber; Additional reporting by Rene Wagner; Editing by Thomas Escritt and Maria Sheahan)

European Stocks at Record High on German Property Deal, Tech Rally

By Sruthi Shankar

The pan-European STOXX 600 index rose 0.3% to an all-time high of 446.47 points after it surpassed its early-May peak of 446.19.

Germany’s DAX gained 0.8%, hitting a record high after a long weekend, boosted by news that Europe’s largest residential property group Vonovia SE agreed to take over its rival Deutsche Wohnen for about 18 billion euros ($22 billion).

Deutsche Wohnen surged 15.5%, while Vonovia fell 4.1%. Europe’s wider real estate index added 1.7% to touch the highest level in over a year.

Technology stocks rallied 1.2% after their Wall Street peers climbed overnight on fresh insistence from U.S. Federal Reserve officials that loose policy would stay on hold.

A lessening of inflation fears saw euro zone government bond yields edge down for the third day in a row. [US/]

“In the last couple of days, bond yields have come down a little bit and that has allowed equity markets to breathe again,” said Roland Kayolan, European equity strategist at Societe Generale.

“We’re still in a phase where economies are reopening gradually in Europe and we should see better leading indicators in the coming months.”

Investors looked past data that showed German economy shrank more than expected in the first quarter as business morale improved in May, with companies turning more upbeat in the light of falling coronavirus infections and steps towards re-opening.

Europe’s STOXX 600 is up about 12% so far this year, largely in line with Wall Street’s S&P 500 as re-opening optimism lifted shares of economically sensitive sectors such as financials and energy.

Miners came under pressure as China said it would strengthen price controls of key commodities after warning against hoarding and speculation to cool a blistering rally in prices of industrial commodities.

HeidelbergCement AG gained 1.9% after U.S. construction materials supplier Martin Marietta Materials said it would buy the German company’s assets in California and Arizona for $2.3 billion.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Uttaresh.V and Arun Koyyur)

European Equities: Economic Data from Germany and the U.S to Guide the Majors

Economic Calendar:

Tuesday, 25th May 2021

German GDP (QoQ) (Q1) Final

German GDP (YoY) (Q1) Final

German Ifo Business Climate Index (May)

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 a relatively bullish start to the week for the European majors on Monday, with the German markets closed.

The CAC40 and EuroStoxx600 rose by 0.35% and by 0.14% respectively.

Market optimism towards the economic outlook continued mute concerns over inflation and a possible shift in FED monetary policy. Lagarde’s assurances of unwavering support on Friday was key.

Tech stocks led the way on the day.

The Stats

There were no major stats from the Eurozone for the markets to consider, with the German markets shut on Monday.

From the U.S

There were also no material stats from the U.S to provide the majors with direction late in the session.

The Market Movers

For the DAX: Germany was on holiday at the start of the week.

From the CAC, it was a mixed day for the banks. Credit Agricole and Soc Gen ended the day down by 0.39% and by 0.15% respectively. BNP Paribas rose by 0.85% gain.

It was a bullish day for the French auto sector, however. Stellantis NV rose by 0.47%, with Renault gaining 1.41%.

Air France-KLM and Airbus SE ended the day with modest gains of 0.31% and 0.36% respectively.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Monday.

Following a 2.52% fall on Friday, the VIX declined by 8.68% to end the day at 18.40.

The NASDAQ rallied by 1.41%, with the Dow and the S&P500 ending the day up by 0.54% and by 0.99% respectively.

VIX 250521 Daily Chart

The Day Ahead

It’s a busier day ahead on the European economic calendar. Finalized GDP numbers and IFO Business Climate figures for Germany are due out later this morning.

While we will expect the GDP numbers to draw interest, expect the IFO figures for May to be the key driver.

From the U.S, consumer confidence figures for May will also provide direction late in the European session.

The Futures

In the futures markets, at the time of writing, the Dow Mini up by 38 points, while the DAX was down by 5 points.

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

Indices Continue the Rise From the Last Week

 

Indices start this week on the front foot. The global bounce from the end of the last week seems secure.

Gold waiting for a breakout inside of the pennant formation.

Brent Oil continuing the bounce from a crucial horizontal support on the 65 USD/oz.

The EURUSD pair cannot decide which direction it is heading, having strong bullish and bearish days, one after another.

The AUDCHF pair is testing 38,2% Fibonacci. First buyers are there!

The NZDCAD pair is coming back above the lower line of the descending triangle pattern. That is potentially a start of a false breakout pattern and a legitimate buy signal.

The GBPJPY pair tests the neckline of a nice Head and Shoulders formation.

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

European Equities: A Quiet Economic Calendar and Low Volumes May Test Support

Economic Calendar:

Tuesday, 25th May 2021

German GDP (QoQ) (Q1) Final

German GDP (YoY) (Q1) Final

German Ifo Business Climate Index (May)

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 a relatively bullish end to the week for the European majors on Friday.

The CAC40 and EuroStoxx600 rose by 0.68% and by 0.57% respectively, with the DAX30 ending the day up by 0.44%.

Economic data from the Eurozone and the U.S provided further support to the majors following Thursday’s rebound.

Adding to the upside on the day was further assurances from ECB President Lagarde of no shift to policy near-term. In spite of Lagarde’s assurances, the upside at the end of the week was modest. FOMC member talk of a review of the asset purchasing program, in spite of Powell’s assurances of no near-term tapering, left the markets on a cautious footing.

The Stats

Economic data from the Eurozone was on the busier side on Friday with prelim private sector PMIs for May in focus.

France

According to prelim figures, the manufacturing PMI rose from 58.9 to 59.2, with the services PMI rising from 50.3 to 56.6.

Economists had forecast a manufacturing PMI of 58.5 and a services PMI of 53.0.

Germany

The manufacturing PMI fell from 66.2 to 64.0 while the services PMI increased from 49.9 to 52.8.

Economists had forecast a manufacturing PMI of 65.9 and a services PMI of 52.0.

The Eurozone

In May, the manufacturing PMI slipped from 62.9 to 62.8, while the services PMI increased from 50.5 to a 35-month high 55.1. Economists had forecast PMIs of 62.5 and 52.3 respectively.

Supported by the pickup in service sector activity, the composite PMI increased from 53.8 to a 39-month high 56.9. Economists had forecast an increase to 55.1.

According to the Markit survey,

  • The rate of expansion across the private sector hit the highest for over 3-years.
  • New order inflows surged at a pace not seen for almost 15-years.
  • Business optimism continued to hit new highs.
  • Price gauges rose further, however, as demand continued to outstrip supply for many goods and services.

From the U.S

It was a relatively busy day on the economic calendar on Friday, with private sector PMIs for May also in focus.

The services PMI jumped from 64.7 to 70.1, with the manufacturing PMI rising from 60.5 to 61.5. Economists had forecast PMIs of 64.5 and 60.2 respectively.

The marked pickup in private sector activity mid-way through the 2nd quarter delivered support to the majors.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Continental rallied by 2.31% to lead the way, with Daimler rising by 0.75%. BMW and Volkswagen ended the day with modest gains of 0.11% and 0.28% respectively.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank rose by 2.79% and by 0.40% respectively.

From the CAC, it was a bullish day for the banks. Credit Agricole and Soc Gen ended the day up by 0.71%S and by 0.48% respectively. BNP Paribas eked out a 0.05% gain.

It was also a bullish day for the French auto sector. Stellantis NV rose by 2.07%, with Renault gaining 0.59%.

Air France-KLM avoided further losses, rising by 0.02%, with Airbus SE ended the day up by 1.45%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Friday.

Following a 6.81% fall from Thursday, the VIX declined by 2.52% to end the day at 20.15.

The Dow rose by 0.36%, while the NASDAQ and the S&P500 ended the day down by 0.48% and by 0.08% respectively.

VIX 240521 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the European economic data front. There are no material stats due out of the Eurozone to provide the European majors with direction.

Trading volumes will also be on the lighter side, with Germany on holiday at the start of the week.

From the U.S, there are also no major stats for the markets to consider.

With little to distract the markets, expect any central bank chatter to influence. We can also expect concerns over inflation to remain a factor following last week’s private sector PMI numbers.

The Futures

In the futures markets, at the time of writing, the Dow Mini up by 19 points.

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