European Equities Will China Data Spoil the Party?

April 18
05:04 2019

Economic Calendar:

Wednesday, 17th April 2019

  • Italian CPI m/m (Mar) Final
  • Core CPI y/y (Mar) Final (Eurozone)
  • CPI m/m (Mar) (Eurozone)
  • CPI y/y (Mar) Final (Eurozone)
  • Trade Balance (Feb) (Eurozone)

Thursday, 18th April 2019

  • German PPI m/m (Mar)
  • French Manufacturing PMI (Apr) prelim
  • French Services PMI (Apr) prelim
  • German Manufacturing PMI (Apr) prelim
  • German Services PMI (Apr) prelim
  • Manufacturing PMI (Apr) prelim (Eurozone)
  • Markit Composite PMI (Apr) prelim (Eurozone)
  • Services PMI (Apr) prelim (Eurozone)

Friday, 19th April 2019

  • N/A

The Majors

The European majors continued to advance on Tuesday. Leading the way, yet again, was the DAX that gained 0.67%. Close behind were the CAC40 and EuroStoxx600, which gained 0.36% and 0.29% respectively.

Through the early part of the day, risk appetite got a boost off the back of a pickup in consumer sentiment in April.

Out of Germany, the ZEW Economic Sentiment Index jumped from minus 3.6 to a plus 3.1 in April, which was well ahead of a forecasted plus 0.8.

Interestingly, the markets largely brushed aside the pullback in the current conditions sub-index, which eased from plus 11.1 to plus 5.5. Forecasts were for a decline to plus 8.

While an extension to Brexit was attributed to the better than expected headline figure, negative sentiment towards incoming orders and industrial production weighed.

The Sentiment Index for the Eurozone also saw a marked improvement, rising from minus 2.5 to plus 4.5. Forecasts were for a recovery to plus 1.2.

On the DAX, Deutsche Bank was amongst the front runners, up by 2.21%, with Volkswagen also seeing sizeable gains, up by 1.61%. Commerzbank and BNP Paribas also found support, rising by 3.09% and 1.73% respectively.

In spite of concerns over Goldman Sachs and Citigroup earnings, Italian banks also found support on Tuesday. UniCredit S.p.A rallied by 3.2% on the day, following news of $ 1.3bn settlement on U.S sanction violations.

U.S Industrial production figures failed to pin back the European majors, in spite of production seeing an unexpected 0.2% decline in March. The markets are evidently finding comfort in the talk of an imminent trade agreement between the U.S and China.

For the DAX, it was the first time to close out at 12,100 levels since last October… Not a bad recovery since late December’s 12-month low 10,381.51.

The Day Ahead

Following the consumer sentiment figures released on Tuesday, focus shifts to finalized March inflation and trade figures due out of the Eurozone.

While forecasts are for consumer prices to see a marked pickup in March, the core annual rate of inflation is expected to remain well below the ECB’s objective, which is a positive for the European equity markets.

With inflation numbers likely to support, the Eurozone’s trade data is unlikely to have a material impact on the day.

GDP and industrial production figures released out of China in the early part of today are failed to spur the bulls into action. Slower growth in the 1st quarter, quarter-on-quarter, offset better than expected yearly numbers.

On the earnings front, Morgan Stanley is due to release their quarterly earnings. A positive set of results could well offset any negativity stemming from this morning’s stats out of China, though it may take a day or two to filter through…

The markets continue to be forgiving towards any weak manufacturing sector numbers on hopes of a U.S – China trade agreement.

At the time of writing, the futures were in the red. The DAX30 was down 7 points, while the CAC40 is pointed to a 21.5 point gain at the open.


This article was originally posted on FX Empire


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