DAX, CAC, and FTSE 100: Futures Point to a Bullish Session

The Majors

It was a bullish Friday session, with the CAC and DAX seeing gains of 0.88% and 1.64%, respectively. However, the FTSE 100 trailed the front-runners, rising by just 0.04%, with a stronger GBP/USD pegging the 100 back from a more meaningful move.

Early in the day, private sector PMI numbers from China and the euro area were positive. Following impressive Caixin Manufacturing PMI numbers from China, the Caixin Services PMI was also positive, with the PMI rising from 52.9 to 55.0.

Later in the session, the Fed talk of ‘slow and steady’ resonated, with a solid ISM Non-Manufacturing PMI survey also bullish.

The NASDAQ Composite Index and the S&P 500 responded to the stats and shift in Fed sentiment, rising by 1.97% and 1.61%, respectively. The Dow gained 1.17%.

The Stats

German trade data drew interest ahead of service and composite PMIs. The German trade surplus widened from €9.7 billion to €10.8 billion in January, suggesting a less gloomy macroeconomic environment.

For the Euro area, the Services PMI increased from 50.8 to 52.7, down from a prelim 53.0. The Composite PMI rose from 50.3 to 52.0, down from a prelim 52.3.

According to the Finalized Composite Survey,

• The Eurozone economy expanded at its most marked pace since June 2022.
• Incoming new business increased for the first time since May 2022, though new export sales fell for a twelfth consecutive month.
• Business confidence rose to a 12-month high but sat below pre-Ukraine war levels.
• Firms continued to hire across the private sector, with the pace of hiring above the series average.
• Across the manufacturing sector, input price inflation slowed, while service sector companies reported a sharp increase in operating costs because of wage pressures.

By member state, Spain ranked first, with the Composite PMI hitting a nine-month high of 55.7. German sat at the bottom of the table, with an eight-month high of 50.7.

From the US

The US economic calendar drew plenty of interest, with the all-important ISM Non-Manufacturing PMI survey in focus.

In February, the ISM Non-Manufacturing PMI slipped from 55.2 to 55.1, signaling a positive service sector outlook. Significantly, the ISM Non-Manufacturing Employment Index jumped from 50.0 to 54.0, suggesting that firms have yet to reach the top side of hiring.

While the stats supported a hawkish Fed, a shift in sentiment toward the Fed policy outlook delivered support for riskier assets. FOMC Member Bostic broke from the recent hawkish rhetoric, favoring a ‘slow and steady’ hand and a 25-basis point rate hike. The comments resonated on Friday.

The Market Movers

For the DAX: It was a bullish day for the auto sector. Volkswagen surged by 10.56% on an improved earnings outlook, with Continental rallying by 5.44%. BMW and Daimler saw relatively modest gains of 2.14% and 2.68%, respectively.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up 1.94% and 3.41%, respectively.

From the CAC, the banks found much-needed support. Soc Gen gained 1.66%, with BNP Paribas and Credit Agricole rising by 1.40% and 1.06%, respectively.

Stellantis NV and Renault ended the day with gains of 2.89% and 1.65%, respectively.

Air France-KLM rallied by 2.41%, with Airbus SE rising by 1.03%

From the FTSE 100, HSBC Holdings Plc slipped by 0.11%, with Shell Plc and BP Plc seeing losses of 0.94% and 1.05%, respectively. Unilever Plc declined by 1.03%, while Diageo fell by 0.06%.

However, mining stocks delivered support. Rio Tinto and Glencore rallied by 2.09% and 2.35%, respectively, with Anglo American rising by 1.79%.

Across the banking sector, Barclays (-0.16%) joined HSBC in the red, while Lloyds (+0.88%) and Standard Chartered (+0.15%) made modest gains.

The Day Ahead for the DAX and the Pack

It’s a quiet day on the European economic calendar. Euro area retail sales figures will draw interest ahead of US factory orders. With little else for the markets to consider, we expect the numbers to influence.

However, market sentiment toward central bank monetary policy outlooks will remain the key driver. A less hawkish Fed would support the demand for riskier assets, while a stronger Pound would test appetite for the FTSE 100.

From earlier in the day, growth targets from China could question market optimism toward the economic outlook.

The Futures – DAX Trails the CAC 40

Across the futures markets, the FTSE 100 was down 7 points, while the CAC and DAX gained 63 points and 35 points, respectively. The US futures had a bullish morning. The NASDAQ mini was up 32.5 points, with the Dow mini rising by 7.

For a look at all of the economic events, check out our economic calendar.