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European Equities: Will Trump Threaten more Tariffs to Sink the Majors?

November 19
13:04 2019

Economic Calendar:

Wednesday, 20th November 2019

  • German PPI (MoM) (Oct)

Thursday, 21st November 2019

  • ECB Monetary Policy Meeting Minutes

Friday, 22nd November 2019

  • German GDP (YoY) (Q3) 2nd Estimate
  • German GDP (QoQ) (Q3) 2nd Estimate
  • French Manufacturing PMI (Nov) Prelim
  • French Services PMI (Nov) Prelim
  • German Manufacturing PMI (Nov) Prelim
  • German Services PMI (Nov) Prelim
  • Eurozone Manufacturing PMI (Nov) Prelim
  • Eurozone Markit Composite PMI (Nov) Prelim
  • Eurozone Services PMI (Nov) Prelim

The Majors

It was back in the red for the European majors at the start of the week, with the DAX falling by 0.26% to lead the way. The CAC40 and EuroStoxx600 saw more modest losses of 0.16% and 0.01% respectively.

With the economic calendar on the quieter side throughout the day, geopolitics provide direction on Monday.

While the Tories saw their lead widen according to the opinion polls and Brexit uncertainty diminish, it was trade chatter that weighed.

News of China having issues with Trump’s unwillingness to roll back tariffs has led to question marks over Beijing signing an agreement.

There’s the ongoing impeachment and the 2020 presidential election to consider. China may ultimately prefer to sit it out and see the outcome of both before signing a phase 1 agreement that retains tariffs…

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. There were no material stats from the Eurozone or the U.S to provide the majors with direction.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector, as the markets responded to negative chatter from Beijing on trade. Volkswagen and BMW led the way down, sliding by 3.93% and 1.89% respectively. Volkswagen was the DAX’s worst performer on the day.

Continental and Daimler were also amongst the top 10 worst-performing stocks on the day, falling by 1.35% and 1.00% respectively.

It was a mixed day for the banks, however. While Deutsche Bank rose by 0.39%, with Commerzbank fell by 1.28%.

From the CAC, bank stocks struggled at the start of the week. Soc Gen led the way down, falling by 0.72%. BNP Paribas and Credit Agricole saw more modest losses of 0.08% and 0.32% respectively.

It was also a particularly bearish day for Autos. Peugeot slid by 3.28%, with Renault falling by 2.08%.

On the VIX Index

The VIX rose by 3.4% on Monday. Partially reversing a 7.66% slide from Friday, the VIX ended the day at 12.5.

Whilst the U.S majors closed out the day in positive territory, with the S&P500 eking out a 0.05% gain, sentiment towards trade provided support on the day.

The U.S majors continue to sit at around record levels in spite of the ongoing impeachment testimonies and uncertainty over trade.

The Day Ahead

It’s another particularly quiet day ahead on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide direction on the day.

A lack of stats will leave the majors in the hands of risk sentiment throughout the day. Geopolitics continues to be the key driver, with updates from the U.S and Beijing on trade talks in focus.

Following Monday’s news, positive updates from Beijing will be needed to support the majors on the day. It’s unlikely that Trump would reverse his decision on tariffs just yet… He may, however, threaten China with more tariffs.

From the U.S economic calendar, October building permits and housing starts are unlikely to have an impact, barring dire numbers.

In the futures market, at the time of writing, the DAX30 was up by 15.5 points, with the Dow up by 7 points.

This article was originally posted on FX Empire

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