European Equities: Private Sector PMIs in Focus as the Markets Look to Assess the Damage


Friday, 22nd January

French Manufacturing PMI (Jan) Prelim

French Services PMI (Jan) Prelim

German Manufacturing PMI (Jan) Prelim

German Services PMI (Jan) Prelim

Eurozone Manufacturing PMI (Jan) Prelim

Eurozone Markit Composite PMI (Jan) Prelim

Eurozone Services PMI (Jan) Prelim

The Majors

It was a mixed day for the European majors on Thursday. The EuroStoxx600 eked out a 0.01% gain, while the CAC40 and DAX30 fell by 0.67% and by 0.11% respectively.

A bullish start to the day had seen the European majors find strong footing ahead of the ECB press conference.

In line with expectations, the ECB stood pat on monetary policy, leaving the press conference as the main event.

Lagarde noted that the economic recovery was at risk due to the surge in COVID-19 cases. In spite of the warning, Lagarde continued to see the economic recovery aligned with the ECB’s December projections.

For 2021, Eurosystem staff had projected growth of 3.9% for the euro area back in December.

In the event of prolonged and tighter containment measures and sustained economic scarring, however, the economy was projected to grow by just 0.4%.

The Eurosystem staff projected 6.0% growth in a mild scenario. This forecast was based on the assumption that the pandemic is successfully contained during the course of 2021. As things stand, the mild scenario now looks an unlikely event.

The Stats

It was a quieter day on the economic calendar. There were no material stats from the Eurozone to provide the European majors with direction.

While there were no material stats to consider, the ECB monetary policy decision and press conference drew attention.

In line with market expectations, the ECB held policy unchanged.

From the press conference, Lagarde’s views on the economic outlook weighed on the European majors, which gave up early gains. This was in spite of the ECB President standing by the December growth forecasts.

Extended lockdown measures going into February coupled with Lagarde’s cautious tone left the DAX30 and CAC40 in the red.

From the U.S

After a quiet 1st half of the week, the weekly jobless claims and December Philly FED Manufacturing PMI figures were in focus.

In the week ending 15th January, initial jobless claims slipped from 926k to 900k. In the week prior, claims had jumped from 784k to 926k.

The Philly FED Manufacturing Index rose from 11.1 to 26.5 in January. Economists had forecast an increase to 12.0. The employment sub-index jumped from 5.6 to 22.5.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Volkswagen rallied by 2.64%, with Daimler rising by 1.73% to lead the way. BMW and Continental saw more modest gains of 0.52% and 1.08% respectively.

It was a relatively bullish day for the banks. Deutsche Bank eked out a 0.02% gain, with Commerzbank rising by 0.14%.

From the CAC, it was a bearish day for the banks. BNP Paribas slipped by 0.18%, with Credit Agricole and Soc Gen falling by 1.42% and by 1.09% respectively.

It was also a mixed day for the French auto sector. Stellantis NV slid by 1.94%, while Renault rose by 1.25%.

Air France-KLM fell by 2.67% with Airbus SE sliding by 3.30%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Thursday, marking a 9th daily loss of the year. Following a 7.14% slide on Wednesday, the VIX fell by 1.20% to end the day at 21.32.

The NASDAQ and the S&P500 rose by 0.55% and by 0.03% respectively, while the Dow slipped by 0.04%.

Positive economic data from the U.S provided little support to the majors. While positive, jobless claims figures remained alarmingly high mid-way through the month.

Anticipation of further fiscal stimulus was negative for the VIX on the day. A continued rise in new COVID-19 cases and the threat of another surge remained a concern for the markets, however.

The Day Ahead

It’s a busy day ahead on the economic calendar. January prelim private sector PMI figures for France, Germany, and the Eurozone are due out later this morning.

Expect market sensitivity to the prelim numbers following ECB President Lagarde’s comments on Thursday. The markets had hoped for a pickup in economic activity at the turn of the year. Extended lockdown measures suggest otherwise…

From the U.S, January’s private sector PMIs will also influence. Expect service sector PMI figures to have the greatest influence on the majors.

Away from the economic calendar, COVID-19 news, together with updates from Capitol Hill will remain in focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 33 points.

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

This article was originally posted on FX Empire