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European Equities: U.S Politics and Stimulus Talk to Test the Majors

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The Majors

It was a bullish day for the European majors on Thursday. The DAX30 rose by 0.88% to lead the way, with the CAC40 and EuroStoxx600 gaining 0.61% and 0.78% respectively.

Economic data took a back seat on the day, with the markets responding to Trump chatter once more. Following Tuesday’s announcement to postpone negotiations, Trump tweeted of plans to support airlines and deliver other stimulus measures on Wednesday.

The news had hit the wires after the European close, leaving the European majors to respond on Thursday.

The Stats

It was a relatively quiet day on the Eurozone economic calendar.

Key stats included August trade data from Germany.

In August, Germany’s trade surplus narrowed from €18.0bn to €15.7bn. Economists had forecast a widening to €18.2bn.

According to Destatis,

  • Exports increased by 2.4% from the previous month to €91.2bn, coming in ahead of a forecasted 1.4% rise.
  • Germany exported goods to the value of €48.2bn to EU member states, which was down by 7% compared with August 2019.
  • Exports to Euro countries fell by 8.3% to €32.4bn.
  • To countries outside of the EU, exports slid by 13.6% to €43.0bn when compared with August 2019.
  • Exports to China fell by 1.1% when compared with August 2019, while exports to the U.S tumbled by 21.1%.
  • Imports increased by 5.8% on the previous month to €78.5bn, coming in well ahead of a forecasted 1.4% increase.
  • German imported goods to the value of €41.6bn from EU member states. Compared with August 2019, imports fell by 5.4%
  • Imports from Eurozone member states fell by 6.5% to €28.0bn.
  • From countries outside of the EU, imports declined by 10.5% to €36.9bn when compared with August 2019.

On the monetary policy front, the ECB monetary policy meeting minutes were also in focus later in the day.

There were no major surprises, however, with the markets focused on Trump, COVID-19 stimulus, and U.S stats

From the U.S

It was a relatively quiet day on the economic calendar. The weekly jobless claims figures were in focus late in the European session.

In the week ending 2nd October, initial jobless claims came in at 840k, which was down marginally from 849k in the week prior. Economists had forecast a fall to 820k.

Ahead of the European open, the Vice Presidential debate had little influence, while hopes of an interim COVID-19 stimulus package provided support.

Late on Wednesday, the U.S President had tweeted that there was support on its way for airlines along with other stimulus measures. The tweet had led to a bounce-back in the U.S equity markets, following Tuesday’s losses.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. BMW and Continental avoided the red, with modest gains of 0.06% and 0.15% respectively. Daimler and Volkswagen ended the day down by 0.21% and by 0.63% respectively.

It was a bullish day for the banks, however. Deutsche Bank and Commerzbank rose by 1.74% and by 1.57% respectively.

From the CAC, it was a bullish day for bank stocks. Soc Gen and BNP Paribas rose by 2.09% and by 1.86% respectively. Credit Agricole ending the day with a more modest 1.46% gain.

It was also a bullish day for the French auto sector. Peugeot and Renault saw gains of 0.38% and 0.83% respectively.

Air France-KLM rose by 1.76% off the back of a 3.23% rally on Wednesday, while Airbus SE eked out a 0.33% gain.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday. Following a 4.82% decline from Wednesday, the VIX fell by 6.06% to end the day at 26.36.

Trump’s 2nd tweet of plans to deliver aid to airlines and other stimulus measures continued to provide support to the U.S majors.

While House Speaker Pelosi rejected the notion of a smaller scale interim airline aid package, hopes of further stimulus in the new year remained.

For the U.S equity markets, Biden’s lead in the U.S Presidential Election polls has also failed to spook the markets.

The NASDAQ and S&P500 rose by 0.55% and by 0.62% respectively, with the Dow gaining a more modest 0.34%.

The Day Ahead

It’s a particularly quiet day on the Eurozone economic calendar.

There are no material stats due out of the Eurozone or the U.S to provide the majors with direction.

While we can expect the majors to take their cues from any chatter from Washington overnight, the service sector PMI from China will also influence. September’s Caixin Service PMI is due out later this morning.

Through the day, expect any updates on Brexit to also influence. Updates from talks this week were market positive, leaving talks next week to decide Britain’s fate.

The Futures

In the futures markets, at the time of writing, the Dow was up by 123 points, with the DAX up by 22 points. #USFiscalPlan##StockMarket#


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