European Equities: The ECB, Brexit, and Capitol Hill in Focus

by Warrior2

The Majors

It was a mixed day for the European majors on Wednesday. The CAC40 slipped by 0.26%, while the DAX30 and EuroStoxx600 saw modest gains of 0.47% and 0.32% respectively.

Progress towards a U.S stimulus package coupled with a COVID-19 vaccine had delivered early support to the European majors.

A shift in focus to Brexit talks, however, led to a late pullback from day highs. Boris Johnson and Frost were set to meet with EU President Ursula von der Leyen and Barnier after the European close.

For the CAC40, STMicroelectronics slid by 11.8% to drag the index into the red. On Wednesday, STM had announced that it would postpone a $12bn annual sales target to 2023.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. German trade data was in focus going into the European open.

In October, Germany’s trade surplus widened from €17.6bn to €18.2bn. Economists had forecast a widening to €18.0bn.

According to Destatis,

  • Exports increased by 0.8% to €112.0bn on the previous month, while down by 6.5% from the same month a year earlier.
  • Imports rose by 0.3% to €92.7bn on the previous month, while down by 5.8% from the same time a year earlier.

Trade with EU countries:

  • Germany exported goods to the value of €59.7bn to EU member states, while importing goods to the value of €50.4bn.
  • Compared with October 2019, exports to EU member states slid by 5.1%, with imports falling by 2.9%.

Trade with Non-EU Countries:

  • Exports of goods to countries outside of the EU totaled €52.4bn, while imports stood at €42.2bn.

From the U.S

It was also a relatively quiet day on the economic data front, with JOLTs job openings in focus.

In October, JOLTs job openings increased from 6.494m to 6.652m. Economists had forecast a decline to 6.300m.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Volkswagen rose by 2.09%, with BMW and Daimler seeing gains of 0.26% and 0.05% respectively. Continental bucked the trend, however, falling by 0.31%.

It was also a mixed day for the banks. Deutsche Bank fell by 1.82%, while Commerzbank rose by 0.15%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 0.59% and by 0.14% respectively, with Soc Gen gaining by 0.86%.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 3.13% and 3.81% respectively.

Air France-KLM rose by 0.58%, while Airbus SE fell by 1.20%.

On the VIX Index

It was back into the green for the VIX on Wednesday. Reversing a 2.91% fall from Tuesday, the VIX rose by 7.69% to end the day at 22.27.

With economic data on the lighter side, the focus was on Capitol Hill, where lawmakers failed once more to deliver a stimulus package.

The Dow and S&P500 fell by 0.35% and by 0.79% respectively, with NASDAQ sliding by 1.94%.

The Day Ahead

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

While there are no stats to consider, the ECB is in action later in the day. The markets are expecting further support.

Any disappointment and gloomy economic projections would likely test support for the majors on the day.

From the U.S, the weekly jobless claims and November inflation figures will also draw attention later in the session.

Away from the economic calendar, however, Brexit and chatter from Capitol Hill will continue to influence. On the Brexit front, updates from Wednesday’s dinner meeting and chatter from the EU Summit will be key drivers.

Overnight, emergency talks failed to pave a way forward. While key differences remained, both sides agreed to resume talks in a bid to iron out the differences. A Sunday deadline was also agreed on the future of talks, which doesn’t leave long to address the key hurdles that remain.

A failure by lawmakers on Capitol Hill to deliver a stimulus package on Wednesday will also be a test for the majors going into the open.

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