European Equities: China PMI and Trump Trade War Tactics to Test the Majors

Economic Calendar:

Friday, 31st May

  • German Retail Sales m/m (Apr)
  • Italian CPI m/m (May)
  • German CPI m/m (May)

The Majors

The European majors managed to brush aside negative sentiment through the Asian session to reduce the losses for the week.

Leading the way was the DAX30, which gained 0.54%. The CAC40 and EuroStoxx600, were not far behind, ending the day up by 0.51% and by 0.42% respectively.

As May comes rapidly to a close, the bulls will be wanting to forget about the last month. The CAC40 as down by 6.04% for the current month, with the DAX30 down by 3.58%.

The majors were saved from a late reversal on the day, with U.S President Trump’s shift in trade focus towards Mexico weighing on market risk sentiment.

The Stats

Economic data released through the European session was on the lighter side on Thursday.

Spain’s May prelim inflation figures provided little direction for the majors on the day, in spite of softer than forecasted figures.

The annual rate of inflation eased from 1.5% to 0.8%, which was worse than a forecasted 1.2%.

The Market Movers

On the DAX, Wirecard went from worst to the best performing, rallying by 5.04%. The Thursday gain partially reversed an 8.25% slide from Wednesday.

From the auto sector, it was a mixed bag on the day. Continental managed to avoid another heavy loss, rising by 0.06%, with Volkswagen (+0.04%) also ending the day in the green. BMW (-0.06%) and Daimler (-0.17%) saw red on the day.

From the banking sector, there was more pain for Deutsche Bank and Commerzbank. The pair ended the day down by 0.23% and by 0.65% respectively.

From the CAC, BNP Paribas managed to avoid the red again, with a 0.06% gain. Credit Agricole reversed Wednesday’s 0.87% loss with a 0.98% gain on the day.

The Day Ahead

Economic data due out of the Eurozone is on the heavier side in the day ahead. German prelim inflation and April retail sales are due out along with Italy’s prelim inflation figures.

While the markets are expecting softer inflation numbers, which would be positive for the European majors, German retail sales will be the key driver.

Retail sales are forecasted to be negative for the DAX on the day. A fall in retail sales, coupled with the rise in unemployment and deterioration in consumer and business confidence continues to paint a dark cloud over the German economy.

Later in the day, U.S inflation and personal spending figures and the May Chicago PMI will also provide direction on the day.

Outside of the stats, trade war tensions will likely overshadow the numbers, however.

At the time of writing, the DAX30 was down by 86.5 points, with the Dow Mini down by 190 points.

European Equities: Futures Point to a Positive Open. Can They Hold On?

Economic Calendar:

Thursday, 30th May

  • Spanish HICP (YoY) (May)

Friday, 31st May

  • German Retail Sales m/m (Apr)
  • Italian CPI m/m (May)
  • German CPI m/m (May)

The Majors

The European majors took a hit on Wednesday, underperforming the Asian and U.S majors on the day.

Leading the way down on the day was the CAC40, which slid by 1.7%. The DAX30 and EuroStoxx600 were close behind, falling by 1.57% and by 1.43% respectively.

Following the Asian majors into the red from the start of the session, the U.S majors also failed to provide support, as demand for government bonds weighed.

China’s retaliatory measures to Trump’s Monday comments on the prospects of a near-term U.S – China trade agreement continued to drive demand for the safe havens. Economic data and Brexit have added to the current market mood.

The Stats

Economic data released through the European session was on the heavier side on Wednesday.

Out of France,

French 1sts quarter GDP, May prelim inflation and April consumer spending figures failed to shift sentiment going into the European session.

According to figures released by Insee, the French economy grew by 1.2% year-on-year in the 1st quarter. This was up from the 1st estimate of 1.1%. Quarter-on-quarter, the economy grew by 0.6%, which was in line with 1st estimate figures.

Consumer spending impressed in April, Rising by 0.8%. Spending came in well ahead of a forecasted 0.5% rise and a 0.3% fall in March.

While negative for the EUR, inflationary pressures eased, according to prelim inflation figures. Consumer prices rose by just 0.2% in May, coming in short of a forecasted and April 0.3% increase.

Out of Germany,

While the French stats were skewed to the positive, German economic data raised yet more red flags. According to Destatis, unemployment increased by 60k in May, coming in well ahead of a forecasted 8k fall. The jump in unemployed led to the unemployment rate rising from 4.9% to 5.0%.

ECB Financial Stability Report

With Germany’s numbers sounding the alarm bells, the ECB released its semi-annual financial stability report.

According to the latest report,

  • Challenges to financial stability have increased amid downside risks to the economic outlook.
  • Heightened political and policy uncertainty could add to public debt sustainability concerns.
  • Euro area bank profitability remains subdued and prospects have deteriorated.

The ECB’s outlook and Germany’s disappointing employment figures came at the worse time for the European majors.

Demand for government bonds has been on the rise since Tuesday and continued to sound the alarm bells through Wednesday.

The surge in demand for U.S Treasuries had led to an inversion of the yield curve that extended further on Wednesday, sending the majors into the deep red.

Negative economic outlooks, weak economic data, and an escalation in the U.S – China trade war have all contributed to this week’s shift.

The Market Movers

On the DAX, Wirecard continued to be the investor favorite to reflect sentiment, with an 8.25% slide on Wednesday. ThyssenKrupp was the 2nd worse performing stock on the index, falling by 3.1%.

From the auto sector, Continental slid by 1.92%, with Volkswagen (-0.76%), BMW (-0.91%) and Daimler (-0.28%) also seeing red on the day.

The negative sentiment towards the global economic outlook weighed on German banks, with Commerzbank and Deutsche Bank falling by 1% and 1.89% respectively.

From the CAC, BNP Paribas managed to eke out a 0.15% gain, while Credit Agricole fell by 0.87%. Renault continued to find support, following merger talk, gaining 0.62%.

The Day Ahead

Economic data due out of the Eurozone is on the lighter side in the day ahead. Spain’s May prelim inflation figures are due out later this morning. The markets will likely brush aside the figures, as the markets continue to fixate on global economic indicators and the U.S – China trade war.

Later in the day, 2nd estimate U.S GDP numbers for the 1st quarter are due out alongside weekly jobless claims figures and April trade data.

The GDP estimate will need to impress for the market angst to subside. While of lesser influence, there will be some interest in the trade figures, as Trump looks for the next trading partner to single out. Pending home sales are also due out. We can expect the figures to have a muted impact on risk sentiment on the day.

Trade talk through the day will need to be monitored. Will the U.S President make some comforting statements to ease the market tension?

At the time of writing, the DAX30 was up by 36 points, with the Dow Mini up by 10 points.

European Equities: Trade War Rhetoric to Weigh Early on

Economic Calendar:

Wednesday, 29th May

  • French Consumer Spending m/m (Apr)
  • French GDP q/q (Q1)
  • CPI m/m (May) Prelim (French)
  • HICP m/m (May) Prelim (French)
  • German Unemployment Change (May)
  • German Unemployment Rate (May)

Thursday, 30th May

  • Spanish HICP (YoY) (May)

Friday, 31st May

  • German Retail Sales m/m (Apr)
  • Italian CPI m/m (May)
  • German CPI m/m (May)

The Majors

The European majors failed to make it 3-in-a-row on Tuesday.

Leading the way down was the CAC40, which fell by 0.44% on the day to leave the index down by 0.07% for the current week.

The DAX30 and EuroStoxx600 weren’t far behind, with losses of 0.37% and 0.22% respectively. While on the decline on Tuesday, the DAX held onto positive territory for the current week.

The Stats

Economic data released through the European session was on the heavier side on Tuesday.

Consumer Confidence

Germany’s June GfK consumer climate figures provided direction going into the European open.

According to the latest GfK study, the GfK is predicting a consumer climate value of 10.1 points for June, down from a revised 10.2 points in May. The GfK consumer climate value was revised down from 10.4 to 10.2 for May.

The study showed that, while income expectations improved, economic outlook and propensity to buy fell.

Business Confidence

Later in the session, the Eurozone’s May business figures also provided direction.

According to figures released by the EU Commission, the Business Climate Indicator (BCI) for the euro area fell from +0.42 to +0.30 in May.

The 0.12 point fall was attributed to a marked decline in manager view on past production, export order books and, to a lesser degree, their assessment of overall order books. Improved sentiment towards production expectations and appraisals of stocks of finished goods provided support.

In May 2018, the BCI stood at 1.44.

Geopolitics

Outside of the numbers, market sentiment towards the U.S – China trade war deteriorated on the day. The reversal came in a delayed response to Trump’s comments from Japan. Trump had said that the U.S was not yet ready for a trade deal with China.

China’s willingness to fight back in the extended trade war has added to the market angst.

Weaker than forecasted economic data out of the Eurozone on the day reignited concerns over the economic outlook. The shift in sentiment came as business and consumer confidence weakened further.

Negative sentiment towards the global economic outlook led to a sharp increase in demand for government bonds on the day.

Adding to the negative mood, Italy looks as though it’s about to enter into another battle with the EU over government spending.

Italian government bond yields saw a marked increase as a result of investors jumping into German government bonds and U.S Treasuries on the day, adding to the downward pressure on the major indexes.

The Market Movers

On the DAX, it was a mixed bag. While Continental rose by 0.95%, Volkswagen (-0.14%), BMW (-0.06%) and Daimler (-0.63%) saw red on the day.

From the banking sector, Deutsche Bank and Commerzbank struggled on the day, sliding by 2.97% and by 2.11% respectively.

In spite of the disappointing stats and market jitters, BNP Paribas eked out a 0.19% gain. Alongside its European peers, Credit Agricole fell by 0.39%, with Italy’s UniCredit S.p.A falling 1.44%.

The Day Ahead

Economic data due out of the Eurozone is on the heavier side again in the day ahead.

French consumer spending, prelim inflation, and 2nd estimate GDP numbers for the 1st quarter are due out ahead of Germany’s May unemployment figures.

German unemployment numbers on the day will likely be the key driver, barring any particular dire numbers out of France.

With no material stats due out of the U.S to influence market risk sentiment, any trade war chatter will influence.

Market sentiment towards the economic outlook turned for the worse on Tuesday. With the Asian equity markets seeing red and demand for government bonds on the rise, the European majors will likely be under pressure from the open.

At the time of writing, the DAX30 was down by 82 points, with the Dow Mini down by 67 points.

European Equities: Economic Data and Trade Talk in Focus

Economic Calendar:

Tuesday, 28th May

  • GfK German Consumer Climate (Jun)
  • Eurozone Business Confidence

Wednesday, 29th May

  • French Consumer Spending m/m (Apr)
  • French GDP q/q (Q1)
  • German Unemployment Change (May)
  • German Unemployment Rate (May)

Thursday, 30th May

  • Spanish HICP (YoY) (May)

Friday, 31st May

  • German Retail Sales m/m (Apr)
  • Italian CPI m/m (May)
  • German CPI m/m (May)

The Majors

The European majors managed to make it a 2nd day in the green following on from Friday’s gains.

The DAX led the way, gaining 0.5%, with the CAC40 and EuroStoxx600 rising by 0.37% and by 0.22% respectively.

In spite of the 2nd consecutive day of gains, the DAX was down 2.21% for the current month, with the CAC down by 4.48%, supporting the traditional May sell-off.

Support for the majors came from the EU parliamentary election results. While the mainstream parties lost some ground, expectations had been for populist and far-right parties to win more seats.

Gains were tempered, however, with U.S President Trump stating that the U.S was not yet ready to make a trade deal with China.

With the U.S markets closed on the day, there were no stats to influence from across the Pond.

The Stats

The economic calendar was on the quiet side on Monday. French jobseeker figures provided little direction ahead of the open. Total jobseekers fell from 3,382.6k to 3,372.9k.

The Market Movers

On a relatively quiet day, where the markets were more interested in EU election results than trade or economic conditions, talk of a Renault – Fiat merger grabbed the headlines. Renault ended the day with a 12.09% gain, with Fiat up by 7.98% on the day.

From the DAX, Wirecard led the way once more, rising by 2.31%, with Deutsche Bank up by 1.5%.

In spite of the talk of a Renault – Fiat merger, German autos were mixed on the day. Volkswagen gained 1.01%, with Daimler and Continental up by 0.71% and by 0.34% respectively. By contrast, BMW (-0.36%) joined French car maker Peugeot (-3.25%) in the red.

From elsewhere, UniCredit S.p.A slid by 2.28% off the back of news that Italy may face disciplinary action over ballooning public debt.

From the CAC, BNP Paribas and Credit Agricole ended the day up by 0.67% and by 1.62% respectively.

The Day Ahead

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

Germany’s June GfK consumer climate figures are due out ahead of the European open. While forecasts are market neutral, any weaker than forecast would be negative for the markets.

Later in the day, the Eurozone’s May business confidence figures will also provide direction. Forecasts are market negative.

From outside of the Eurozone, U.S May consumer confidence figures will also have an impact on market risk appetite later in the day.

U.S consumer confidence has been on the rise of late, but housing sector data suggests that some concern over the economic outlook may have crept in.

Outside of the stats, we can expect market sensitivity to trade chatter to persist through the day. With the U.S President announcing progress on trade talks with Japan, it may not be long before the EU comes under the spotlight.

At the time of writing, the DAX30 was up by 21.5 points, with the Dow Mini up by 52 points.

European Equities: The Majors Are in for a Mixed Day Ahead

The Majors

The European majors managed to find support at the end of a particularly dire week for the European equity markets.

The CAC40 gained 0.67%, with the DAX and EuroStoxx600 rising by 0.49% and by 0.56% respectively.

In spite of the Friday gains, the DAX ended the week down by 2.7%, with the CAC and EuroStoxx600 down by 2.24% and 1.6% respectively.

Support at the end of the week came off the back of comments from U.S President Trump, which eased market jitters over the ongoing U.S – China trade war.

Trump talked of the possible inclusion of Huawei in any trade deal, having blacklisted the Chinese telco in response to a lack of progress on trade talks.

There was also support from China, with China’s vice Premier talking of further fiscal policy support from the Chinese government.

The Stats

Following some disappointing economic data on Thursday, there were no material stats to provide direction on the day.

Gains in the equity markets came in spite of the EU elections taking place through the weekend, where populist and far-right governments could find their voice.

The Market Movers

For the DAX, Wirecard led the way on the day. A 2% gain partially reversed Thursday’s 3.91% slide. Things were less rosy for ThyssenKrupp and Infineon Technologies, however. The pair led the way down on Friday. ThyssenKrupp followed Thursday’s 4.46% slide with a 2.09% fall on Friday. Infineon Tech fell by 1.91%, following a 3.83% fall on Thursday.

ThyssenKrupp and Infineon Tech ended the week down by 4.47% and 8.57% respectively.

Deutsche Bank and Commerzbank also saw heavy losses on Friday, falling by 1.58% and by 1.19% respectively.

The auto sector found support, however, following the shift in sentiment towards the U.S – China trade war. BMW rose by 1.03%, with Continental and Volkswagen gaining 0.86% and 0.62% respectively. Bucking the trend was Daimler, which slipped by 0.13% on the day.

From the CAC40, BNP Paribas and Credit Agricole gained 0.58% and 2% respectively, supported by the better than expected French PMI numbers from Thursday. In spite of the gains on the day, the pair were in the red for the week.

The Day Ahead

It’s another quiet start to the week, with no material stats due out of the Eurozone on the day.

We can expect market reaction to the EU election results to provide direction at the start of the week.

The lack of any major election shocks, coupled with Friday’s shift in sentiment towards the U.S – China trade war, should provide some early support. A lack of direction, however, will see sentiment towards the economic outlook to also influence.

The markets will also look for more updates from the U.S and China on trade, though with the U.S on holiday, there could be little forthcoming from the U.S administration.

At the time of writing, the DAX30 was up by 36 points, with the Dow Mini up by 10 points.

European Equities: A Choppy Day Ahead as the Trade War Begins to Hurt

The Majors

It was risk off for the European majors on Thursday. Leading the way down was the CAC40, which slid by 1.81%. Close behind were the DAX30 and EuroStoxx600, which fell by 1.78% and by 1.42% respectively.

The losses on the day left the CAC down by 2.88% for the current week and the DAX down by 2.34%.

It wasn’t much better in the U.S markets, which pinned back any hopes of a recovery for the European majors. The Dow ended the day with a 1.06% loss, with the NASDAQ down by 1.58%.

Trade war jitters continued to plague the global financial markets, with economic data out of both the Eurozone and the U.S adding to the negative sentiment.

The Stats

Economic data released through the session was on the heavier side on Thursday. Germany’s 2nd estimate GDP figures for the 1st quarter, prelim May private-sector PMI numbers and Germany’s IFO Business Climate index figures provided direction through the early part of the day.

While Germany’s 2nd estimate GDP numbers were in line with prelim, both private sector PMI and business sentiment figures disappointed.

The PMIs

According to prelim figures, Germany’s manufacturing PMI fell from 44.4 to 44.3, falling short of a forecasted increase to 44.8.

  • Of concern was a 4th fall in new orders in 5-months.
  • The flash service PMI activity index fell to a 4-month low, with the manufacturing PMI falling to a 2-month low.
  • The Service sector PMI eased from 55.7 to 55.0. Forecasts were for the service PMI to ease to 55.5.
  • In spite of the pullback in both sectors, the Composite Output Index rose to its highest level since February. Up from 52.2 to 52.4.

Adding to the negative sentiment were disappointing Eurozone PMI numbers and German business sentiment figures.

The Eurozone Manufacturing PMI fell from 47.9 to 47.7, falling short of a forecasted rise to 48.1. Service sector activity also eased, with the PMI falling from 52.8 to 52.5. The composite PMI rose from 51.5 to 51.6, falling short of a forecasted 51.7. Of significance was a marked fall in new export orders, with new export orders falling for 8-months in a row.

The lack of new business and slide in backlogs led to a pullback in hiring. A material shift in labor market conditions would leave the ECB with little choice but to make a move. It won’t be the start that Draghi’s successor will be looking for…

On the day, the only bright spot was a pickup in private sector activity, with both the services and manufacturing sectors reporting a pickup in activity. It wasn’t enough to soften the blow on the CAC40, however.

Business Sentiment

If things weren’t bad enough with the PMI numbers, Germany’s Ifo Business Climate Index fell from 99.2 to 97.90 in May.

According to the latest ifo institute survey, a material fall in the current conditions index weighed. The index fell from 103.3 to 100.6.

While the business climate for manufacturing eased, the business climate for the services sector took a hit, falling from 26.4 to 20.9.

ECB Monetary Policy Minutes

Outside of the stats, the ECB released its monetary policy meeting minutes later in the day. The minutes revealed growing concern over the euro bloc’s economic growth prospects

The Market Movers

For the DAX, ThyssenKrupp (-4.46%), Wirecard (-3.91%) and Infineon Technologies (-3.83%) were amongst the worst performers on the day. The trio has seen heightened volatility as the markets respond to trade war chatter in recent weeks.

Unsurprisingly, both the autos and bank stocks also suffered, with the disappointing economic data and concerns over the extended trade war weighing on the day.

From the auto sector, Continental led the way down on the DAX, sliding by 2.25%. BMW (-1.08%), Daimler (-0.38%) and Volkswagen (-0.95%) saw more moderate losses.

From the financial sector, Deutsche Bank fell by 1.71%, while Commerzbank slid by 4.47%. From elsewhere, UniCredit S.p.A fell by 1.09%, with BNP Paribas ending the day down by -1.93%.

The Day Ahead

It’s a quiet day ahead on the economic calendar, with no material stats due out of the Eurozone.

The lack of stats will leave sentiment towards the U.S – China trade war and the EU Parliamentary elections to provide direction on the day.

At the time of writing, the DAX30 was up by 23.5 points. The U.S futures were also in the green, with the Dow Mini up by 69 points. While the futures are pointing to a positive open, a reversal could be on the cards. Economic data out of the U.S later today will be negative if in line with or worse than forecast. Support for the markets would need to come from Trump’s Twitter account…

European Equities: Stats, Elections and Trade in Focus

Economic Calendar:

Thursday, 23rd May

  • German GDP q/q (Q1) Final
  • German GDP y/y (Q1) Final
  • French Manufacturing PMI (May) Prelim
  • French Services PMI (May) Prelim
  • German Manufacturing PMI (May) Prelim
  • German Services PMI (May) Prelim
  • Eurozone Manufacturing PMI (May) Prelim
  • Eurozone Markit Composite PMI (May) Prelim
  • Eurozone Services PMI (May) Prelim
  • German Ifo Business Climate, Expectations and Current Conditions Indexes
  • ECB Monetary Policy Meeting Minutes

The Majors

It was a mixed day for the European majors on Wednesday. The DAX eked out a 0.21% gain, while the CAC40 fell by 0.12%. A late pullback left the EuroStoxx600 down by 0.08% by the close.

For the current week, the majors are in the red, with the CAC40 down by 1.09% and the DAX30 down by 0.57%. The EuroStoxx600 was down by 0.74%.

Trade war chatter has ultimately left the majors in the red, with news of the U.S looking to blacklist more Chinese companies questioning market optimism over a near-term resolution to the extended trade war.

The Stats

There were no material stats released through the European session to provide the majors with direction on the day.

The Market Movers

For the DAX a late in the day rally reversed losses from mid-way through the session to end the day in positive territory.

Leading the way on the DAX was Wirecard, which surged by 4.82%. A distant second and finding strong support was Adidas, which gained 1.84%.

Weighing on the DAX were bank and auto stocks. Leading the way down was Daimler, which slid by 3.28%. BMW (-1.46%), Volkswagen (-0.95%) and Continental (-1.08%) also hit red on the day.

From the banking sector, Deutsche Bank and Commerzbank fell by 1.97% and 3.12% respectively, with BNP Paribas (-1.08%) and UniCredit S.p.A (-1.01%) also seeing red on the day.

Both financial and auto stocks remain particularly sensitive to trade war chatter. While both sides have shown a willingness to resume talks, the extended olive branches have yet to result in a formalized meeting. With the G20 now around the corner, it may be left for China’s Premier Xi and U.S President Trump to hash it out.

The Day Ahead

It’s a particularly busy day ahead on the economic calendar. While 2nd estimate German GDP numbers are due out in the early part of the day, barring any revisions, the focus will be on Germany’s business sentiment and manufacturing PMI numbers.

Market sensitivity towards the Eurozone economy will also place a greater emphasis on the Eurozone’s composite.

While forecasts are EUR positive, Germany’s manufacturing sector is expected to continue to contract. The devil will be in the details and we can expect the markets to hone in on new orders and new export orders in particular.

Alongside the stats, the ECB monetary policy meeting minutes are also due out, which will also have an impact on the majors.

On the geopolitical front, the EU parliamentary elections and trade war chatter will also need to be considered on the day.

At the time of writing, the DAX30 was down by 67 points. The U.S futures were also in the red, with the Dow Mini down by 83 points.

Dollar Squeezes Competitors Out

The dollar is also growing against the Australian dollar and the Japanese yen. In general, all this pushes the dollar to the area of two-year highs, from where it declined in late April. Strengthening the dollar is often an additional reason for reducing the demand for risky assets, including stocks and currencies of emerging economies.

Stocks

Stock indexes grew yesterday but cannot fully recover from the drop on Monday. Key US indices grew around 0.8% on Tuesday but struggle to rise further on Wednesday morning, according to futures for S&P500. It is worth noting that SPX remains under the 50-day moving average, and the strengthening of the dollar can become an additional factor of pressure on stocks. On the other hand, the four previous trading session, the debt markets show an increase in the yield of 10-year treasuries, which is a positive signal for stock buyers.

EURUSD

The single currency develops a downtrend, showing the 8th day of intraday lower lows and highs. The pressure on the euro is partly due to the decline of the British currency, and partly as a reaction to the increased demand for USD as a safe-haven currency. Europe may well be vulnerable to the Chinese economy sharp slowdown. In addition, the currency crisis continues to smolder in Turkey. The Central Bank attempts to stop the decline of TRY require stronger measures.

Tesla

The company’s stocks during trading on Monday and Tuesday declined below $200, which is the lowest level since December 2016. It is worth noting that this year the company’s stocks were out of stock index rally, and increased the decline in May, dropping below the support level of the previous two years at $250. As for the technical analysis, the current decline impulse is able to send Tesla stocks to the area of $180, to the lows of 2014-2016. On the negative news background, the stock may continue its decline, moving towards $100.

This article was written by FxPro

European Equities: Will Trade Talks Resume or Is More Needed from Trump

Economic Calendar:

Wednesday, 22nd May

  • ECB President Draghi Speaks

Friday, 24th May

  • German GDP q/q (Q1) Final
  • German GDP y/y (Q1) Final
  • French Manufacturing PMI (May) Prelim
  • French Services PMI (May) Prelim
  • German Manufacturing PMI (May) Prelim
  • German Services PMI (May) Prelim
  • Eurozone Manufacturing PMI (May) Prelim
  • Eurozone Markit Composite PMI (May) Prelim
  • Eurozone Services PMI (May) Prelim
  • German Ifo Business Climate, Ifo Expectations, and Ifo Current Conditions
  • ECB Monetary Policy Meeting Minutes

The Majors

The European majors managed to claw back some of Monday’s losses on Tuesday. Leading the way on the day was the DAX, which gained 0.85%.

For the CAC and EuroStoxx600, the gains were more modest. The CAC ended the day up 0.5%, with the EuroStoxx600 up by 0.54%.

The Stats

Economic data was on the lighter side through the day, with the Eurozone’s May flash Consumer Confidence figures the only stats for the markets to consider.

According to the EU Commission report, the Euro area consumer confidence indicator increased by 0.8 points to -6.5. Recovering from a fall from -7.2 to -7.9 in April, the indicator continued to sit well above the long-run average of -10.7.

With economic data out of the U.S limited to housing sector figures, there was little on the economic calendar to weigh on risk sentiment.

While the consumer confidence numbers provided support, upside from the day came from easing tensions over Huawei.

Following a string of U.S firms announcing a cutting of ties with Huawei on Monday, Google reversed its decision to cut ties following a decision by the U.S government to soften trade restrictions on the Chinese Telco.

Huawei’s troubles are not over, but the latest move by the U.S government could prise the door open to resume trade talks.

The Market Movers

The DAX managed to avoid negative territory for the first time in 3-days. Wirecard and ThyssenKrupp led the way, with gains of 5.84% and 4.61% respectively.

In spite of the softer stance on Huawei and a recovery in the tech sector, Infineon Technologies AG (“IFX”) only managed to gain 1.6% on Tuesday, partially reversing a 4.74% slide on Monday.

While Googe has reversed its decision, the U.S government stance on Huawei buying new software and components remains, which is likely to maintain pressure on the broader sector near-term.

Elsewhere, it was a mixed session for bank stocks in spite of the improvement in consumer confidence. Deutsche Bank and BNP Paribas gained 1.44% and 0.83% respectively. Commerzbank and UniCredit S.p.A fell by 0.14% and by 0.31% respectively.

Across the auto sector, Continental and Daimler gained 1.25% and 0.94% respectively, supported by the latest moves in the U.S – China trade war.

BWM and Volkswagen struggled through the day, however. BMW rose by just 0.02%, while Volkswagen fell by 0.08% on the day.

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone today.

While there are no stats due for release, ECB President Draghi will speak later this morning. Any policy chatter will impact the EUR, but will unlikely have a material impact on the major equities, as the focus continues to hinge on the U.S – China trade war.

We can expect the majors to be sensitive to the news wires through the session, especially with a lack of stats to provide a distraction.

As U.S President Trump looks to offset the negative effects of the ongoing trade war, China’s more aggressive stance may require more restraint from the U.S President, which would be market positive.

At the time of writing, the DAX30 was up by 10.0 points. The U.S futures were also positive, with the Dow Mini was up by 5 points.

European Equities: Futures Point to a Rebound. Holding on is a Different Story…

Economic Calendar:

Tuesday, 21st May

  • Eurozone Consumer Confidence Flash

Wednesday, 22nd May

  • ECB President Draghi Speaks

Friday, 24th May

  • German GDP q/q (Q1) Final
  • German GDP y/y (Q1) Final
  • French Manufacturing PMI (May) Prelim
  • French Services PMI (May) Prelim
  • German Manufacturing PMI (May) Prelim
  • German Services PMI (May) Prelim
  • Eurozone Manufacturing PMI (May) Prelim
  • Eurozone Markit Composite PMI (May) Prelim
  • Eurozone Services PMI (May) Prelim
  • German Ifo Business Climate
  • Ifo Expectations (German IFO)
  • Current Conditions (German IFO)
  • ECB Monetary Policy Meeting Minutes

The Majors

The European majors kicked off the week on the back foot. Leading the way down was the DAX30, which slid by 1.61%, reversing last week’s 1.49% gain with interest.

Close behind were the CAC40 and EuroStoxx600, which fell by 1.46% and by 1.06% respectively on the day.

The Stats

Economic data was on the lighter side through the day, with German wholesale inflation figures the only stats for the markets to consider.

According to Destatis, the producer price index increased by 0.5% in April, coming in well ahead of a forecasted 0.3% rise. Producer prices had fallen by 0.1% in March. Year-on-year, the index of producer prices rose by 2.5%, up from 2.4% in March.

The figures failed to influence, with the focus remaining on the U.S – China trade war and recent escalation following Trump’s blacklisting of Huawei.

The Market Movers

The DAX failed to touch green intraday for a 2nd consecutive day, with autos and bank stocks seeing heavy losses on the day.

Daimler slid by 2.41%, with BMW and Continental down by 1.64% and 1.62% respectively. Volkswagen fared slightly better, with a 1.15% loss. Negative sentiment towards the ongoing U.S – China trade war weighing.

From the banking sector, Deutsche Bank and Commerzbank slid by 2.25% and 4.24% respectively.

Elsewhere, BNP Paribas fell by 1.65%, with UniCredit S.p.A losing 2.15% on the day.

While banks and auto stocks struggled, tech stocks saw the heaviest losses as the markets continued to respond to Trump’s moves against Huawei.

On the DAX, Infineon Technologies AG (“IFX”) was the worse performer on the day, sliding by 4.74%, following news that the company had suspended shipments to Huawei.

The Day Ahead

It’s another quiet day ahead on the economic data front. The Eurozone’s consumer confidence figures are due out later this afternoon.

The majors and the EUR will likely respond to any further deterioration in consumer confidence later today. With the ongoing U.S – China trade war impacting the global economy and demand from the Eurozone, domestic consumption will remain a key contributor to the bloc’s economy. Weak consumer confidence figures will temper any hopes of support from consumption.

While we will expect consumer confidence figures to influence, trade war chatter will remain the key driver through the day.

At the time of writing, the DAX30 was up by 71.5 points. The U.S futures were also positive, with the Dow Mini was up by 110 points.

European Equities: It’s All Eyes and Ears on the Oval Office. What’s Next?

Economic Calendar:

Monday, 20th May

  • German PPI m/m (Apr)

Tuesday, 21st May

  • Eurozone Consumer Confidence Flash

Wednesday, 22nd May

  • ECB President Draghi Speaks

Friday, 24th May

  • German GDP q/q (Q1) Final
  • German GDP y/y (Q1) Final
  • French Manufacturing PMI (May) Prelim
  • French Services PMI (May) Prelim
  • German Manufacturing PMI (May) Prelim
  • German Services PMI (May) Prelim
  • Eurozone Manufacturing PMI (May) Prelim
  • Eurozone Markit Composite PMI (May) Prelim
  • Eurozone Services PMI (May) Prelim
  • German Ifo Expectations
  • Ifo Current Conditions (German)
  • Ifo Business Climate (German)
  • ECB Monetary Policy Meeting Minutes

The Majors

The majors closed out the week on the back foot, though the losses weren’t enough to reverse gains made from earlier in the week.

The DAX led the way down on Friday, falling by 0.58% to end the week with a 1.49% gain. The CAC40 and EuroStoxx600 saw more modest losses of 0.18% and 0.36% respectively.

For the week, the CAC40 led the way, rallying by 2.08%, while the EuroStoxx600 gained 1.16%.

The Stats

On the data front, the stats were limited to the Eurozone’s April finalized inflation figures. The stats provided little support to the majors, in spite of inflation continuing to sit well below the ECB’s target.

According to Eurostat, the annual rate of inflation came in at 1.7% in April 2019, up from 1.4% in March 2019. The final figure was in line with prelim and forecasts.

Contribution to the uptick in inflation came from services (+0.86pp), energy (+0.51pp), food, alcohol & tobacco (+0.29pp) and non-energy industrial goods (+0.06pp).

The annual rate of core inflation, however, stood at just 1.3% in April, up from 1.0% in March, while in line with core inflation in both January and February of this year. From an ECB perspective, the core numbers are certainly not going to shift sentiment towards monetary policy near-term.

From elsewhere, economic data out of the U.S provided support. Impressive consumer sentiment numbers gave the majors a boost late on.

The Market Movers

For the DAX, it was red throughout the day, while the CAC managed to briefly move into positive territory in the early part of the session.

Weighing on the DAX through the day was BMW, which slid by 5.75% on the day. Daimler (-1.07%); Volkswagen (-0.64%) and Continental (-0.31%) also saw red on the day.

Joining autos in the red were bank stocks, with Deutsche Bank and Commerzbank ending the day down by 0.90% and 1.39% respectively.

BNP Paribas ended the day down by 1.25%, with UniCredit S.p.A sliding by 2.01%.

Negative sentiment towards the U.S – China trade war weighed on both sectors through the day.

The Day Ahead

It’s a particularly quiet day ahead on the economic data front. German wholesale inflation figures are due out later this morning.

The numbers are unlikely to have an impact on the majors through the day.

It was a mixed Asian session this morning, a lack of progress on the U.S – China trade talks continues to be a negative near-term. While there are hopes of progress at next month’s G20 Summit, the latest move against Huawei muddies the waters.

News of U.S companies halting the supply of software and components to Huawei in response to the U.S administration ban is also negative.

At the time of writing, the DAX30 was down by just 12 points. The U.S futures were positive, however, with the Dow Mini was up by 78 points.

U.S economic data has shown that the economy has been resilient to date, in spite of the extended trade war. It’s not been quite the same for the EU and China…

European Equities: A Lack of Stats Leaves Trade in the Spotlight

Economic Calendar:

Friday, 17th May

  • Eurozone Core CPI (YoY) (Apr) Final
  • Eurozone CPI (YoY) (Apr) Final
  • Eurozone CPI (MoM) (Apr)

The Majors

After an edgy start to the day, it was onwards and upwards for the majors. The DAX30 led the way on Thursday, rallying by 1.74%. Also seeing solid gains, the CAC40 and EuroStoxx600 rose by 1.37% and by 1.27% respectively.

Following a dicey start to the week, a 3rd consecutive day in the green gave the DAX a 2.08% gain for the current week, reducing the deficit for the month to just 0.27%. For the CAC40, however, it was still down 2.48% for the current month.

The Stats

On the data front, the stats were skewed to the positive for the majors.

The Eurozone’s trade surplus widened from €17.9bn to €22.5bn in March. According to figures released by Eurostat,

  • Intra-euro area trade fell to €172.1bn in March 2019, down 0.3% compared with March 2018.
  • Exports to the rest of the world increased by 3.9% in the 1st quarter, compared with the 1st quarter of 2018.
  • Imports increased by 4.8% over the same period, leading to a narrowing of the trade surplus from €46.5bn to €43.5bn in Q1.
  • Compared with the 1st quarter of 2018, intra-euro area trade increased by 2.5%.

Finalized inflation figures out of Italy had a muted impact, with the finalized numbers being in line with prelim.

From elsewhere, economic data out of the U.S impressed late on in the European session. While housing sector numbers and the weekly jobless claims figures were positive, a jump in the Philly FED Manufacturing Index was key on the day.

Outside of the stats, whilst the U.S – China trade war appeared to hit choppier waters, the majors were able to brush off the threat of retaliation by China.

The Market Movers

On the DAX, ThyssenKrupp led the way once more, rallying by 4.15%. The gain came off the back of news hitting the wires of possible interest in its elevators business. Allianz continued to find support following its solid earnings results, rising by 1.76% on the day.

On the back foot, however, was the auto sector. Continental led the way down, sliding by 2.41%. Volkswagen (-1.39%), BMW (-0.99%) and Daimler (-0.55%) also made it into the bottom 10.

While a delay on U.S tariffs on EU autos is a positive, the shift in sentiment towards the U.S – China trade war was not.

By contrast, bank stocks found strong support on the day. Commerzbank and Deutsche Bank rose by 1.85% and 0.18% respectively. Italy’s UniCredit S.p.A gained 1.71%, with France’s BNP Paribas ending the day up 1.54%.

The Day Ahead

It’s a particularly quiet day ahead on the economic data front. The Eurozone’s finalized April inflation figures are due out later this morning.

The numbers are likely to be brushed aside by the markets as the focus remains on U.S – China trade chatter through the day.

With Huawei back in the spotlight, following Trump’s decision to blacklist the telco, China has threatened to react in kind. A lack of progress last week and a possible collapse in talks does question the continued optimism of a resolution.

The markets have become somewhat immune to the Trump dealmaking tactics, however, leaving the majors largely unscathed ahead of today’s open.

We can expect the focus through the day to remain on trade. Consumer sentiment numbers out of the U.S could provide some support should the figures impress later today.

At the time of writing, the DAX30 was down by just 8 points. The U.S futures were positive, however, with the Dow Mini was up by 21 points.

European Equities: It’s Going to be Another Choppy Day Ahead

Economic Calendar:

Thursday, 16th May

  • Italian CPI (MoM) (Apr) Final
  • Eurozone Trade Balance (Mar)

Friday, 17th May

  • Eurozone Core CPI (YoY) (Apr) Final
  • Eurozone CPI (YoY) (Apr) Final
  • Eurozone CPI (MoM) (Apr) Final

The Majors

It was a choppy day for the majors on Wednesday and it took more than economic data to deliver a 2nd consecutive day of gains.

The DAX led the way, rising by 0.9% to move into positive territory for the current week. Elsewhere, the CAC40 gained 0.62%, with the EuroStoxx600 rising by 0.46%.

In spite of a 2nd consecutive day in the green, the EuroStoxx600 remained deep in the red for the current week, down by 1.09%. The CAC40 had managed to move back into the green for the week during Tuesday’s rebound.

It could have been a completely different story had there been no trade chatter from the Oval Office. The European majors had been in the red until the final 2-hours of the session.

Once more the U.S President looked to ease market jitters over protectionism and the threat of a global trade war and, once more the markets responded.

This time around Trump’s comments targeted the EU. News hit the wires of Trump planning to delay the rollout of tariffs on EU auto tariffs for up to 6-months. Simmering under the surface had been a concern that the U.S President would kick off a trade war with the EU as the U.S progressed with China.

While the latest news was positive on the day, it does suggest that even the U.S President is mindful of the impact that the U.S – China trade war is having on the global economy.

The DAX was down by 0.57% ahead of the EU auto tariff news hitting the wires…

The Stats

On the data front, things were relatively balanced.

Key stats included Germany and the Eurozone’s 1st GDP figures along with French finalized April inflation figures.

While French inflation numbers came in ahead of prelim, the focus had been on Germany and the Eurozone’s GDP numbers.

Eurozone 2nd estimate GDP numbers were in line with 1st estimate figures, which provided support, though weaker than forecasted year-on-year GDP numbers out of Germany offset any positive sentiment from the stats.

It could have been worse, however. The German economy had stalled in the 4th quarter, so a 0.4% growth rate in the 1st quarter was not so bad when considering the negative bias in the stats since the start of the year.

According to figures released by Destatis, the Germany economy grew by 0.6% compared with a year earlier. In the 4th quarter, the economy grew by 0.9% and by 1.1% in the 3rd quarter of last year.

From elsewhere, economic data out of China tested risk sentiment from the start of the day. Particularly disappointing industrial production and retail sales figures for April did the damage ahead of the European open.

Economic data out of the U.S had added to the negative sentiment. Retail sales fell in April and core retail sales came up well sort of forecasts. Also adding to the negative sentiment was an unexpected 0.5% fall in industrial production at the start of the 2nd quarter.

The Market Movers

On the DAX, it came as little surprise that the auto sector was the primary beneficiary of Trump’s latest comments.

BMW led the way on the DAX30, surging by 3.14%. Continental and Daimler weren’t far behind, with gains of 2.5% and 2.31% respectively. Volkswagen trailed the pack, rising by just 0.7%.

In spite of the positive sentiment towards the auto sector, the European banks failed to benefit. Commerzbank and Deutsche Bank fell by 1.06% and by 0.1% respectively. On the CAC40, BNP Paribas fell by 0.49%, with Italy’s UniCredit S.p.A ending the day down 0.67%.

Pressure on the sector came from corporate earnings results. Both Credit Agricole and ABN AMRO released disappointing results. A rebound in the German economy failed to boost sentiment towards the economic outlook.

For now, the EU may have been spared from auto tariffs, but the U.S – China trade war is inflicting enough damage of its own. The slump in China’s retail sales in April alone should be an alarm bell. April trade data out of China had suggested strong domestic demand. The retail sales figures question the view…

The Day Ahead

It’s a particularly quiet day ahead on the economic data front. Italy’s finalized April inflation figures and the Eurozone’s March trade data are due out later this morning.

While the markets will likely brush aside the inflation numbers, the trade figures will garner some attention. There’s been plenty of dovish chatter of late, which has not been surprising when considering the stats coming out of the Eurozone.

While improving numbers will ease any immediate concerns over the economy, the outlook may remain clouded, however. The extended U.S – China trade war is weighing on the global economy and the Eurozone is far from buffered from any weakness in China or the U.S economies.

It goes without saying that the majors will remain beholden to the Oval Office and Beijing through the day. Easing up on the EU, while cranking it up against China should also be considered a negative for risk appetite…

From elsewhere, while there were no stats out of China to rock the boat ahead of the European open. Philly FED manufacturing numbers from the U.S will have an impact later today. If they’re anything like the NY Empire State numbers, the majors could breathe a sigh of relief…

At the time of writing, the DAX30 was down by 53.5 points. The U.S futures were also pointing towards a negative open. The Dow Mini was up by 36 points.

European Equities: Can the Renewed Optimism Continue?

Economic Calendar:

Wednesday, 15th May

  • German GDP (QoQ) (Q1)
  • German GDP (YoY) (Q1)
  • French CPI (MoM) (Apr) Final
  • French HICP (MoM) (Apr) Final
  • Eurozone GDP (YoY) (Q1) 2nd Estimate
  • Eurozone GDP (QoQ) (Q1) 2nd Estimate

Thursday, 16th May

  • Italian CPI (MoM) (Apr) Final
  • Eurozone Trade Balance (Mar)

Friday, 17th May

  • Eurozone Core CPI (YoY) (Apr) Final
  • Eurozone CPI (YoY) (Apr) Final
  • Eurozone CPI (MoM) (Apr) Final

The Majors

The majors were on the rebound on Tuesday. Leading the way on the day was the CAC40, which rallied by 1.5% to move into the green for the week.

Both the EuroStoxx600 and DAX saw more modest gains of 1.01% and 0.97% respectively, the pair unable to wipe out Monday’s losses.

Following a particularly dire day on Monday, where the markets balked at the prospect of an extended trade war, it was optimism all over again on Tuesday.

Trump’s love for the U.S equity markets was evidenced with his assurances that a U.S – China trade deal would be reached once the time is right. There was also a confirmation that Trump would be meeting with China Premier Xi at the next Summit.

It was almost a U-turn by a U.S President who had, just a day prior, warned Beijing not to retaliate to the latest tariff hike.

The Stats

On the data front, things were a little more gloomy.

Economic sentiment in both the Eurozone and Germany disappointed. Germany’s ZEW Economic Sentiment Index fell from +3.1 to -2.1 in May. Forecasts were for an increase from +3.1 to +5.1. The slide came in spite of improved sentiment towards the current environment. The ZEW Current Conditions Index rose from +5.5 to +8.2.

Things were not much better for the Eurozone. The Eurozone’s ZEW Economic Sentiment Index fell from +4.5 to -1.6, which was worse than a forecasted rise to +5.0.

Adding towards the negative bias was a 0.3% fall in industrial production in March. While in line with forecasts, an unexpected pickup in German industrial production had raised hopes of better numbers.

According to figures released by Eurostat, production of non-durable consumer goods (-1%) and energy (-0.3%) weighed on the headline number. By member state, Malta (-3.7%) and Greece (-2.7%) saw the largest declines in production. Lithuania (+3.5%) and Slovakia (+1.2%) reported the largest increases in production.

Other notable contributions to the decline came from a 0.9% fall in French production and a 0.9% fall in Italy.

The Market Moves

On the DAX, Wirecard AG (“WDI”) was the best performer, rallying by 4.22%. Adidas found support from the shift in sentiment towards U.S – China trade talks, rising by 1.98%.

Hopes of an eventual agreement eased concerns over an economic meltdown, supporting bank stocks. Commerzbank and Deutsche Bank gained 4.34% and 1.08% respectively. BNP Paribas ended the day with a 1.56% gain, while Credit Agricole (“ACA”) gained 0.93% ahead of its quarterly earnings announcement later today.

The auto sector also found support. BMW (0.28%), Continental (0.50%), Daimler (1.68%) and Volkswagen (0.73%) made gains on the DAX.

On the earnings front, Allianz delivered strong results leading to a 1.91% gain on the day.

The Day Ahead

After a busier day on the economic calendar on Tuesday, we can expect the majors to find more direction from today’s stats.

Germany and the Eurozone’s 1st quarter GDP numbers are due out this morning. The focus will be on Germany’s 1st estimate numbers. Anything weaker than a forecasted 0.4% quarter-on-quarter rise will likely weigh early in the session.

While the Eurozone GDP numbers are 2nd estimates, any downward revision will also be negative.

Off less influence on the day will be French finalized April inflation figures.

From elsewhere, China’s April industrial production and retail sales figures were released earlier in the day, setting the tone…

Industrial production rose by just 5.4% year-on-year, with retail sales rising by 7.2%. The figures fell well short of forecasts, weighing on risk appetite early on in the day.

Looking ahead to the U.S session, U.S retail sales and industrial production figures will also likely have an influence on the day.

Outside of the stats, expect the U.S – China trade war chatter to continue to provide direction. While the markets have been focused on whether a deal will materialize, some attention may need to be given to the effects of the ongoing trade war. It’s been more than a few months and, if China’s stats are anything to go by, there could be more pain to come…

At the time of writing, the DAX30 was up by 11 points. The U.S futures were also pointing towards a positive open. The Dow Mini was up by 13 points.

European Equities: What Happened to all the Optimism over a Deal?

Economic Calendar:

Tuesday, 14th May

  • German CPI m/m (Apr) Final
  • Spanish CPI y/y (Apr) Final
  • Spanish HICP y/y (Apr) Final
  • German ZEW Current Conditions (May)
  • German ZEW Economic Sentiment (May)
  • Eurozone ZEW Economic Sentiment (May)
  • Eurozone Industrial Production m/m (Mar)

Wednesday, 15th May

  • German GDP q/q (Q1)
  • German GDP y/y (Q1)
  • French CPI m/m (Apr) Final
  • French HICP m/m (Apr) Final
  • Eurozone GDP y/y (Q1) 2nd Estimate
  • Eurozone GDP q/q (Q1) 2nd Estimate

Thursday, 16th May

  • Italian CPI m/m (Apr) Final
  • Eurozone Trade Balance (Mar)

Friday, 17th May

  • Eurozone Core CPI y/y (Apr) Final
  • Eurozone CPI y/y (Apr) Final
  • Eurozone CPI m/m (Apr) Final

The Majors

The European majors were back in the red on Monday. Leading the way down was the DAX30, which slid by 1.52%. The EuroStoxx50 and CAC40 ended the day with 1.21% and 1.22% losses respectively.

Losses came in spite of the DAX futures sitting in the green ahead of the European open.

There were no material stats released through the session to influence appetite for the majors, leaving trade war chatter as the key driver.

A series of messages from the U.S President weighed on risk appetite early. Not only did Trump threaten China with far more punitive trade terms in his second term should an agreement not be in place, but he also sent a message telling China not to retaliate to the latest tariff hike.

While China has been given 1-month to turn things around, as we have seen before, China is no Mexico or Canada.

A retaliation was expected and a retaliation materialized… While covering a smaller amount of U.S goods, the target is agriculture though it may well be more far-reaching than that by the time a deal is done. A total of $60bn worth of U.S goods will face tariffs from 1st June.

Across the European majors, ThyssenKrupp was the worst performing stock on the DAX giving up 6.93% of last Friday’s 24% gain.

It was ultimately the more China sensitive stocks that suffered the most on the day.

From the DAX, the auto sector was amongst the worst performing. Continental and Daimler slid by 5.73% and by 3.93% respectively, with Volkswagen (-2.62%) and BMW (-2.19%) also seeing heavy losses.

From the banking sector, Deutsche Bank and Commerzbank also saw deep red, sliding by 2.43% and by 2.26% respectively.

Elsewhere, BNP Paribas and UniCredit S.p.A fell by 1.56% and by 2.8% respectively.

The Day Ahead

After a quiet start to the week, the economic calendar is on the busier side later this morning.

Eurozone and German economic sentiment figures are due out along with industrial production figures out of the Eurozone.

Finalized April inflation numbers due out of Germany and Spain will unlikely have a material impact in the early part of the day.

Following some better than expected stats out of Germany last week, forecasts are for economic sentiment in Germany to improve. Germany’s economic sentiment figure is key this morning.

Eurozone industrial production figures will also have an impact. Following a pickup in production in Germany, the numbers may come in ahead of forecasts, which would be EUR positive.

Outside of the stats, expect the U.S – China trade war chatter to also influence. Trade tariffs are expected to hit U.S consumers, which would be considered Dollar negative. China has now also retaliated and things could spiral out of control if the 2-sides resume talks. There’s the $325bn worth of Chinese goods yet to be tariffed and no doubt, China will retaliate in kind to such a move.

Following heavy losses across the European majors last week, the markets are going to need some particularly good news to avoid another heavy reversal.

On the earnings front, Allianz GA will release their quarterly results, which will garner limited interest on the day.

At the time of writing, the DAX30 was down by 12 points. The U.S futures things were a little better following Monday’s sell-off. The Dow Mini was up by 52 points.

IPO’s in 2019 – What’s the Score?

With the S&P500 skyrocketing by ~15% YTD and Nasdaq climbing by more than 19%, timing seems perfect for founders and early backers to cash out or get the much-needed capital influx.

We saw a fair share home-run IPO’s such as Beyond Meat and Zoom Video Communications as well as a few flops such as Lyft and Uber Technologies.

And with the year not even half over we have a lot more to look forward to.

What can be learned from the results so far and what are the prospects of future upcoming initial public offerings?

The Losers

As it is inherent to human psychology (and to prudent investing) to focus on the risks before the rewards it is best to start this overview with the largest flops so far.

Uber

The most anticipated IPO of 2019 is shaping out to be somewhat of a disappointment.

I know it is a bit early to call an IPO a flop when its shares traded for just one day, even if the results were as miserable as they were, with share price dropping 7.62% on the first day of trading (May 10th).

However, we should consider that just a month ago UBER (Ticker: UBER) was aiming at an IPO valuation of $100 Billion, when they actually managed to reach a total valuation of $75.5 Billion (and that’s if you round up) raising $8.1 Billion at $45 a share.

Timing played a large role in the IPO’s outcome and the initial trading – the company updated its preliminary estimate of Q1/19 results in the IPO documents, little to say, the results weren’t flattering.

Uber Stock Price. Source: Yahoo Finance

The fact that Uber and Lyft drivers went on strike just before the IPO and the trade war with China was reignited didn’t help either, but in my humble opinion, it was Lyft’s IPO that really screwed the pooch for Uber.

Lyft

Uber and Lyft competed on who will be the first to go public and Lyft won that race offering its shares to the public on March 28th, 2019.

Lyft’s IPO (Ticker: LYFT) started off strong, raising $2.34 Billion, with shares going public at $72 – at the top of its price range.

The IPO price provided a valuation of $20.6 Billion which translates to almost a 40% premium over its private valuation. Not to mention that on the first trading day the stock touched a high of $88.6 per share before closing at $78.29.

But just like an enthusiastic sprinter realizing he was actually competing in a marathon the strong start didn’t much matter.

Lyft Stock Price. Source: Yahoo Finance

Lyft’s shares plunged by 29.04% since its initial offering and due to the numerous business similarities with Uber, Lyft’s performance provided a pessimistic outlook for Uber as well.

The Winners

While the ride-hailing industry was beaten and abused by the capital markets it is not to say all IPO’s this year performed negatively. On the contrary, out of the 77 IPO’s of companies with a market cap greater than $50 Million, 56 are in the green.

In fact, there are too many successful IPO’s to cover them all, some mentionable ones include:

  • Levi Strauss & Co. (Ticker: LEVI) which is up 31.65% since its IPO on March 20th
  • Pinterest (Ticker: PINS) which is up 52.89% since its IPO on April 18th
  • Tradweb Markets (Ticker: TW) which is up 59.26% since its IPO on April 3rd

But the 2 IPO’s that really catch the eye are those of Zoom and Beyond Meat.

Zoom

Zoom Video Communications (Ticker: ZM), the developer of video conferencing software, listed its shares on April 17th at $36 per share, above its price range of $33 – $35.

Zoom raised around $750 Million for a total valuation of almost $9.3 billion, or nine times that of its latest private market valuation.

Not resting on its laurels the stock exploded and at the moment of writing is priced at $79.63 per share or a whopping 121.19% upside, amazing performance for a relatively obscure unicorn.

Beyond Meat

The plant-based meat company which was founded by Ethan Brown in 2009 is generating so much buzz and expectations to disrupt/augment the plant-based meat markets its stock is basically boiling.

The marketing and branding efforts of the company are as important to its growth as the R&D efforts, the ability to draw in carnivores in addition to vegetarians could be pivotal for Beyond Meat and these efforts are assisted by endorsements from famous personalities such as Bill Gates, Leonardo DiCaprio and even Snoop Dogg.

Beyond Meat (Ticker: BYND) was listed on May 1st at the higher part of its $23 -$25 range, the company raised $240M to be invested in R&D for a total post IPO valuation of $1.66 Billion.

Beyond Meat Stock Price. Source: Yahoo Finance

Since the shares were listed the stock exploded by ~165% closing on Friday at 66.22 per share.

Things to come:

2019 is expected to provide much more IPO drama with names like Airbnb, Slack, Robinhood and WeWork expected to go public.

The current trend seems to favor companies with a strong service/product offering while shying away from companies based on the gig economy.

It would be interesting to see if this trend continues and if it does what it bodes for the sharing economy in general.

European Equities: The Majors will be at the Mercy of the Oval Office

Economic Calendar

Tuesday, 14th May

  • German CPI (MoM) (Apr) Final
  • Spanish CPI (YoY) (Apr) Final
  • Spanish HICP (YoY) (Apr) Final
  • German ZEW Current Conditions (May)
  • German ZEW Economic Sentiment (May)
  • Eurozone ZEW Economic Sentiment (May)
  • Eurozone Industrial Production (MoM) (Mar)

Wednesday, 15th May

  • German GDP (QoQ) (Q1)
  • German GDP (YoY) (Q1)
  • French CPI (MoM) (Apr) Final
  • French HICP (MoM) (Apr) Final
  • Eurozone GDP (YoY) (Q1) 2nd Estimate
  • Eurozone GDP (QoQ) (Q1) 2nd Estimate

Thursday, 16th May

  • Italian CPI (MoM) (Apr) Final
  • Eurozone Trade Balance (Mar)

Friday, 17th May

  • Eurozone Core CPI (YoY) (Apr) Final
  • Eurozone CPI (YoY) (Apr) Final
  • Eurozone CPI (MoM) (Apr) Final

The Majors

The majors managed to close out the week on a high, though the Friday gains were not nearly enough to reverse the weekly losses.

The DAX led the way on Friday, gaining 0.72% to reduce the deficit for the week to 2.84%. The CAC and EuroStoxx600 saw more modest gains of 0.27% and 0.32% respectively on Friday, leaving the pair deeper in the red for the week.

The CAC40 ended the week down 3.99%, with the EuroStoxx600 down by 3.39%.

Economic data released through the day was limited to 1st quarter nonfarm payroll numbers out of France and March trade data out of Germany.

While a pickup in hiring was positive for the CAC, the DAX found strong support in the early part of the day. According to Destatis, Germany’s trade surplus widened from €18.7bn to €20bn in March.

Month-on-month, exports rose by 1.5%, while imports rose by just 0.4%. Year-on-year, exports increased by 1.9%, while imports rose by 4.5%.

While the March trade data was on the positive side, sentiment towards the 2nd day of U.S – China trade talks pinned back any material upside.

A tariff hike from 10% to 25% on $200bn worth of Chinese goods also went into effect on Friday.

The Market Movers

On the DAX, ThyssenKrupp led the way, surging by 24.1% on Friday. The rally came off the back of news that the company was looking into a partial listing of its elevator business.

While the majority of the European sectors found support through the day, the auto sector continued to struggle. The role out of tariffs pinned back the auto sector due to its sizeable exposure to China.

Daimler led the way down, sliding by 3.56%, with BMW (-0.6%) and Volkswagen (-0.22%) also seeing red on the DAX. Continental managed to buck the trend on the day, rising by 0.18%. On the CAC, Renault slid by 0.85%

Things were somewhat better for bank stocks. Deutsche Bank and Commerzbank rallied by 1.33% and 1.22% respectively. On the CAC40, BNP Paribas rose by 0.15%, while UniCredit S.p.A notched up a 0.74% gain. The gains were modest relative to the heavy losses from Thursday

Commerzbank ended the week down by 6.31%, with Deutsche Bank down by 4.5%.

The Day Ahead

For the day ahead, it’s a particularly quiet day on the economic calendar. There are no material stats scheduled for release later this morning to provide the European majors with direction.

The lack of progress over the U.S – China trade talks last week may begin to weigh on risk sentiment. Friday’s tariff hike from 10% to 25% is expected to have a far more significant impact on the global economy than the 10% tariffs.

Failure by both sides to find common ground, in spite of the tariff hike, suggests that there is some distance to be covered before both sides can reach an agreement.

Over the weekend, to rub salt in the wound, Trump threatened China with the prospects of a more punitive deal in his 2nd term. Assuming that Trump is successful in his campaign next year, it could scupper Beijing’s plans of holding out for a return of the Democrats.

With work already underway to roll out 25% tariffs on another $300bn worth of Chinese goods, things could get from bad to worse.

At the time of writing, the DAX30 was up by 11.5 points. Things were not so rosy for the U.S futures, however. The Dow Mini was down 234 points, with the NASDAQ and S&P500 also pointing to a bearish open. Trump may try to avoid a panic sell-off later in the day by delivering one of his more optimistic views on progress.

European Equities: New Found Optimism Provides Early Support

Economic Calendar:

Friday, 10th May

  • German Trade Balance (Mar)
  • French Non-Farm Payrolls (q/q (Q1)

The Majors

The majors returned to the red on Thursday, reversing Wednesday’s gains with interest.

Leading the way down was the CAC40, which tumbled by 1.93%. Close behind were the DAX30 and EuroStoxx600, which slid by 1.69% and 1.65% respectively.

Following better than expected industrial production figures out of Germany on Wednesday, there were no material stats for the markets to consider. The focus through the day remained hinged on the U.S – China trade talks.

Trade tensions through the day weighed heavily on the European majors and particularly on sectors most exposed to China. Trump’s talk of China having broken the deal suggested that trade talks would be more tense than usual.

On the DAX, Continental AG was the worst performer of the day, sliding by 4.59%. It was a double whammy for Continental. The Company announced a 22% slide in net profit on Thursday. While delivering a more optimistic outlook for the remainder of the year, U.S – China trade tensions offset any optimism. BMW and Daimler were also among the worst performers, falling by 1.87% and by 1.57% respectively. Volkswagen saw a more modest 1.29% fall.

Across the banking sector, Commerzbank tumbled by 4.27%, while Deutsche Bank slipped by 1.68%.

Elsewhere in the banking sector, Italy’s UniCredit S.p.A slid by 2.69%, with France’s BNP Paribas ending the day with a 2.99% loss.

The Day Ahead

For the day ahead, it’s a relatively quiet day on the data front, with Germany’s March trade data and French 1st quarter nonfarm payrolls due out later this morning.

While the nonfarm payroll figures are unlikely to have an impact, German trade data could weigh on risk appetite. The surplus is forecasted to narrow from €18.7bn to €18.2bn. The devil will be in the details, with export numbers likely to have the greatest impact on the day.

From the U.S, April inflation figures will also have an impact on market risk appetite. Softer than forecasted inflation figures would support appetite for riskier assets on the day.

While we can expect the stats to have an influence, the focus will remain on U.S – China trade talks, however.

Following the 1st day of talks on Thursday, the markets will be looking for trade talks to make sufficient progress to prevent the threatened hike in trade tariffs.

Hopes of progress on trade talks provided early support, though anything can happen later in the day.

At the time of writing, the DAX30 was up by 168.5 points. The U.S futures were also pointing towards a bullish open. The Dow Mini was up by 91 points.

European Equities: A Choppy Day Ahead as Trade Talks Resume

Economic Calendar:

Friday, 10th May

  • German Trade Balance (Mar)
  • French Non-Farm Payrolls (q/q (Q1)

The Majors

The majors finally found some support on Wednesday. The DAX led the way, gaining 0.72%, with the CAC40 up by 0.4%. Trailing the pair was the EuroStoxx600, which rose by just 0.15% on the day.

Economic data released through the European session was limited to industrial production figures out of Germany. According to figures released by Destatis, industrial production increased by 0.5% in March, coming in ahead of a forecasted 0.5% decline. Production had risen by 0.7% in February.

While the surprise increase in industrial production was positive, sentiment towards the U.S – China trade talks drove the majors through the day.

News from the U.S Administration of China’s intent to make a trade deal ultimately delivered the gains on the day.

On the DAX, while Wirecard led the way, surging by 4.74%, Siemens rallied by 3.22% off the back of its March quarter earnings results. The Wirecard gains came from a company announcement of its plans to buy back shares.

The positive news from Washington provided support to the auto sector, with Volkswagen ending the day up 0.29%. In spite of dire earnings, BMW managed a 0.06% gain, while Daimler led the way, rallying by 2.28%.

From the banking sector, Deutsche Bank and Commerzbank rose by 0.29% and by 0.90% respectively. Better than expected industrial production figures contributed to the upside on the day. UniCredit S.p.A failed to benefit, however, falling by 0.12% as sentiment towards the Italian economy weighed. France’s BNP Paribas also struggled on the day, falling by 0.12%.

The Day Ahead

It’s a particularly quiet day ahead, with no material stats due out of the Eurozone today.

Continental, Deutsche Telekom, and UniCredit S.p.A are due to release their corporate earnings results through the day. While the results will influence the individual stocks, the results are unlikely to have a material impact on risk appetite through the day.

The majors will be in the hands of the U.S – China trade talks that are set to resume later today.

While China has indicated that it is keen to make a trade agreement, actually reaching an agreement is another story altogether. The 3-day visit was reduced to 2 and China will likely want to renegotiate certain agreements that had been made in previous talks.

Updates from talks through the day will be the key driver and there will likely be some market jitters ahead of any updates.

At the time of writing, the futures reflected the tension. The DAX30 was down by 60 points. The U.S futures were also pointing towards a bearish start to the day. The Dow Mini was down by 132 points.

European Equities: It’s all about Trade for Now

Economic Calendar:

Wednesday, 8th May

  • German Industrial Production m/m (Mar)

Friday, 10th May

  • German Trade Balance (Mar)
  • French Non-Farm Payrolls (q/q (Q1)

The Majors

It was another day in the red for the European majors on Tuesday. The CAC40 led the way, sliding by 1.60%, with the DAX close behind, down by 1.58%. The EuroStoxx600 also saw deep red, falling by 1.37% on the day.

While the U.S majors had shown some resilience at the start of the week, limiting the downside for the likes of the DAX, it was a different story on Tuesday.

Talks of punitive tariffs being rolled out later in the week continued on Tuesday, adding further uncertainty to the trade talks and economic outlook.

The sell-off came despite chatter from Beijing confirming that Vice Premier Liu He will visit the U.S with talks set to kick off on Thursday.

The Stats

While there was plenty of anxiety over what lies ahead on the trade front, economic data out of Germany failed to provide any comfort.

German factory orders rose by just 0.6% in March, according to figures released by Destatis. Orders came up well short of a forecasted 1.5% increase. The only good news was that a run of 4 consecutive monthly falls had come to an end. Year-on-year, orders were down by 6%, nullifying the effects of the month-on-month gain.

From the EU, the EU Commission released its economic forecasts, which were on the more optimistic side. The Commission forecasted that the economic slowdown was likely to bottom out this year. The Commission forecasted a 1.2% GDP for the euro area for 2019. Growth for 2020 was forecasted to pick up to 1.5%.

While forecasts were relatively favorable, the EU Commission did note that downside risks to the outlook remain prominent…

Across the Majors

On the corporate earnings front, BMW delivered the big news of the day. Profits tumbled by 74%. While a legal provision of €1.4bn contributed to the slide, price competition and tech costs also weighed. With the legal provision excluded, earnings for BMWs main unit was down by 42% in the 1st quarter.

BMW shares ended the day down 3.79%, with the rise in trade tensions adding downward pressure. Volkswagen fared slightly better, sliding by 3.32%, while Daimler fell by 2.71%.

Elsewhere, BASF continued to slide following a 4.8% fall on Monday. BASF ended the day with a 4.14% loss.

With the markets losing hope of a near-term resolution to the ongoing U.S – China trade war, bank stocks also saw heavy losses.

Deutsche Bank and Commerzbank ended the day with 2.91% and 2.25% losses. On the CAC40, BNP Paribas fell by 2.11%, with Italy’s UniCredit S.p.A tumbling by 3.2%.

The Day Ahead

It’s another quiet day ahead on the economic data front. Germany’s March industrial production figures are due out later this morning.

Forecasts are negative for the DAX and the EUR, with production forecasted to fall by 0.5%. When considering the state of the German economy, it’s perhaps not surprising to know that production has fallen in 9 of the last 12-months.

Putting aside a 0.7% increase last month, production had fallen 4-months in a row.

Earlier this morning, trade data out of China provided some early support. While exports fell by 2.7%, imports unexpectedly rose by 4%.

With no material stats due out of the U.S later in the day, the focus will remain on the U.S – China trade talks. Talks are due to resume tomorrow and we can expect the markets to be in for a choppy day ahead. Any hint of China pulling out and expect panic stations… There could also be some more posturing from the Oval Office later today…

At the time of writing, the futures reflected a sense of calm as the Asian majors took a dive. The DAX30 was up by 23.5 points.