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European Equities: It’s All About The FED

Bob Mason
Futures point to another slow start to the day. With all eyes on the FED and no material stats to distract, it could be a testy day ahead.

Economic Calendar:

Wednesday, 19th June

  • German PPI (MoM) (May)

Thursday, 20th June

  • ECB Economic Bulletin  
  • Eurozone Consumer Confidence Flash

Friday, 21st June

  • French Manufacturing PMI (Jun) Prelim
  • French Services PMI (Jun) Prelim
  • German Manufacturing PMI (Jun) Prelim
  • German Services PMI (Jun) Prelim
  • Eurozone Manufacturing PMI (Jun) Prelim
  • Eurozone Markit Composite PMI (Jun) Prelim
  • Eurozone Services PMI (Jun) Prelim

The Majors

The European majors found their wings on Tuesday. The CAC40 rallied by 2.2%, following a 0.43% gain on Monday to lead the way. The DAX30 and EuroStoxx600 weren’t far behind with gains of 2.03% and 1.67% respectively.

It was a double whammy for the majors on the day. Talks of further monetary policy stimulus spurred on the majors early on in the European session. The CAC40 and DAX30 bounced back from early losses off the back of ECB President Draghi commenting on the ECB’s willingness to deliver more monetary policy support should inflation fail to pick up.

The expectation of a dovish FED and a more willing ECB were both positives on the day. Hopes of progress on trade talks between the U.S and China was also positive. News of Trump and Xi’s planned meeting at the G20 Summit certainly contributed to the upside on the day.

The Stats

Economic data out of the Eurozone was on the heavier side on Tuesday.

Germany and the Eurozone’s economic sentiment figures and the Eurozone’s inflation and trade data provide direction early on in the day.

According to the latest ZEW survey, the German economic sentiment index fell from -2.1 to -21.1 in June. The current conditions index was also in decline, falling from 8.2 to 7.8. The Eurozone economic sentiment index fell from -1.6 to -20.2.

From the Eurozone, the trade surplus narrowed from €22.5bn to €15.7bn in April. According to figures released by Eurostat,

  • Exports of goods to the rest of the world increased by 5.2% year-on-year in April.
  • Imports of goods from the rest of the world increased by 6.6% over the same period.
  • Intra-euro area trade rose by 3% compared with April 2018.

Of less influence were the Eurozone’s finalized inflation figures, which were in line with prelim and forecasts.

According to finalized numbers, the Eurozone’s annual rate of core inflation also eased back from 1.3% to 0.8% in May.

The Market Movers

From the DAX, Lufthansa was the worst performer for a 2nd consecutive day, sliding by 1.73%, with only a handful of stocks in the red on the day.

Leading the way on the day was ThyssenKrupp which rallied by 4.02%.

Deutsche Bank and Commerzbank also found strong support, surging by 3.62% and 1.82% respectively. The auto sector also benefited from the shift in sentiment. Continental led the way, rallying by 2.15%. BMW (+1.93%), Daimler (+1.97%) and Volkswagen (+1.70%) weren’t far behind.

From the CAC40, Renault bucked the trend, sliding by 2.6%. The rest of the components ended the day with solid gains. From the banking sector, BNP Paribas and Credit Agricole rose by 1.82% and by 1.35% respectively.

The Day Ahead

Economic data is on the lighter side in the day ahead. German wholesale inflation figures are due out that will likely have a muted impact on the majors.

We will expect the European majors to tread carefully ahead of the FED interest rate decision, economic projections and press conference. The European markets will close ahead of the FED decision.

With no stats due out of the U.S, the markets will have little else to focus on through the latter part of the day.

U.S President Trump has already attempted to swing the vote in favor of a rate cut. It’s unlikely to have an influence, however, with FED impartiality key.

At the time of writing, the DAX was down by 1.5 points. The Dow Mini was up by 16 points.

This article was originally posted on FX Empire