European Equities: Brexit, COVID-19, and U.S Stimulus Talks in Focus

by Warrior2

It’s all eyes on Brussels, with Johnson meeting the EU President today. Expect U.S stimulus talks and COVID-19 news to also overshadow economic data today.

Economic Calendar:

Wednesday, 9th December

German Trade Balance (Oct)

Thursday, 10th December

Deposit Facility Rate (Dec)

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ECB Marginal Lending Facility

ECB Interest Rate Decision (Dec)

Friday, 11th December

German CPI (MoM) (Nov) Final

Spanish CPI (YoY) (Nov) Final

Spanish HICP (YoY) (Nov) FinalAdvertisement

The Majors

It was a mixed day for the European majors on Tuesday. The CAC40 fell by 0.23%, while the DAX30 and EuroStoxx600 rose by 0.06% and by 0.20% respectively.

Concerns over a continued rise in new COVID-19 cases across Europe and the U.S weighed on risk sentiment through the session.

The latest rise in new cases has led to some U.S states reintroducing containment measures, with the German government also announcing plans to curb the spread of the virus.

Better than expected economic data from Germany and the Eurozone coupled with hopes of a Brexit deal provided the much-needed support.

News of Boris Johnson planning to meet with EU President Ursula von der Leyen to break the impasse raised hope. Johnson’s willingness to remove contentious clauses from the Internal Market Bill was also well received.

The Stats

It was a relatively busy day on the Eurozone economic calendar. German and Eurozone ZEW Economic Sentiment figures, French non-farm payrolls, and finalized Eurozone GDP numbers were in focus.

In December, Germany’s ZEW Economic Sentiment Index jumped from 39.0 to 55.0, with the Eurozone’s rising from 32.8 to 54.4. The jump came off the back of COVID-19 vaccine news.

For Germany, there was a fall in sentiment towards current conditions, however. Germany’s current conditions index fell from -64.3 to -66.5.

From the Eurozone, the Eurozone economy expanded by 12.5% in the 3rd quarter, reversing an 11.8% contraction from the 2nd quarter. Year-on-year, the economy contracted by 4.3%. In the 2nd quarter, the economy had contracted by 14.8%. Both were revised upwards from previous estimates, though only marginally.

In the 3rd quarter, French nonfarm payrolls increased by 1.6%, following a 1.8% rise in the 2nd quarter.

The GDP numbers, along with French nonfarm payroll figures, had a muted impact on the majors, however.

From the U.S

It was a relatively quiet day on the economic data front, with 3rd quarter unit labor costs and nonfarm productivity numbers in focus.

According to finalized figures, nonfarm productivity rose by 4.6%, with unit labor costs falling by 6.6% quarter-on-quarter.

In the 2nd quarter, nonfarm productivity had jumped by 10.6%, while unit labor costs had risen by 8.5%.

The stats had a muted impact on the markets, however.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. BMW fell by 0.76%, with Continental and Volkswagen seeing losses of 0.48% and 0.53% respectively. Daimler saw a more modest loss of 0.05% on the day.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 0.94% and by 0.85% respectively

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 0.49%, with Credit Agricole and Soc Gen ending the day with losses of 2.66% and 1.53% respectively.

It was also a bearish day for the French auto sector. Peugeot and Renault declined by 0.44% and by 1.39% respectively.

Air France-KLM slid by 3.04% with the latest spike in new COVID-19 cases weighing, while Airbus SE slipped by 0.50%.

On the VIX Index

It was back into the red for the VIX on Tuesday. Reversing a 2.45% gain from Monday, the VIX fell by 2.91% to end the day at 20.68.

While a continued rise in new COVID-19 cases drew attention, progress towards a U.S stimulus package supported riskier assets.

The Dow and S&P500 saw gains of 0.35% and 0.28% respectively, with the NASDAQ rising by 0.50%.

The Day Ahead

It’s another relatively quiet day ahead on the economic calendar. German trade data for October are due out going into the European open.

With a market focus on Brexit and stimulus talks on Capitol Hill, the numbers are unlikely to have a lasting impact on the majors.

From the U.S, JOLTs job openings for October are due out. The numbers are also unlikely to influence, however.

Stimulus and COVID-19 vaccine chatter will remain key drivers on the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 47 points.

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