European Equities: Corporate Earnings, Trade and U.S Stats in Focus

The Majors

The European majors saw red on Thursday, with the DAX leading the way down on the day, sliding by 1.28%. The CAC40 and EuroStoxx600 also saw red, with the pair falling by 0.50% and 0.56% respectively.

A combination of disappointing economic data out of Germany and a less dovish than hoped Draghi press conference weighed. Some market participants had also priced in a rate cut for Thursday, which wasn’t forthcoming.

The Stats

Key stats out of the Eurozone on Thursday included Germany’s IFO Business Sentiment numbers and jobseeker figures out of France.

According to the July IFO survey,

• The Business Climate Index fell from 97.5 to 95.7 in July.
• Also deteriorating was sentiment towards current conditions and business outlook.
• The IFO Current Assessment Index fell from 101.1 to 99.4, with the Business Expectations Index falling from 94 to 92.2.
• In the manufacturing sector, the business climate index saw its largest fall since Feb-09. The current situation index tumbled, with firms also being more pessimistic about the next 6-months.
• The services sector business climate index also declined, falling from 20.3 to 17.7. Sentiment towards current conditions weighed, though firms were also pessimistic for the first time since 2009.
• Things were quite dire in trade, where the business climate index tumbled from 7.9 to 1.4.
• Bucking the trend in July, the construction sector’s business climate index rose from 23 to 23.3. The increase was supported by a more optimistic outlook, as construction companies had a more negative assessment over current conditions.

The ECB

With the markets brushing aside the jobseeker numbers out of France, the focus then shifted to the ECB monetary policy decision and press conference.

The ECB monetary policy statement talked of rates holding at current or lower levels at least through the first half of 2020. Some market participants had anticipated a rate hike on Thursday.

While the minutes talked of further possible monetary policy easing, Draghi was less forthcoming at the ECB press conference, which weighed on the European majors. Draghi talked of high employment, household wealth and wage growth sitting at long-run average levels, which are all supportive of consumption.

From the U.S, June durable goods orders numbers, trade data, and the initial jobless claims were of little influence in spite of some positive numbers.

Corporate Earnings

On the corporate earnings front, Volkswagen released earnings results on Thursday, which were positive but not enough prevent a sell-off. The sell-off came in spite of 2^nd quarter operating profits rising by 30%

Negative sentiment towards a shrinking auto sector weighed, with Wednesday’s manufacturing PMI numbers having also highlighted weak demand for autos.

The Market Movers

From the DAX, the auto sector led the way down. Volkswagen and Daimler slid by 3.34% and by 2.64% respectively. BMW and Continental also hit reverse, with the pair falling by 1.96% and by 0.69% respectively.

Bank stocks fared better on the day, with Deutsche Bank and Commerzbank rising by 0.17% and by 1.02% respectively.

From the CAC, it was a mixed day for the bank stocks. BNP Paribas and Credit Agricole rose by 0.14% and by 0.09% respectively. Soc Gen bucked the trend, falling by 0.76%. Renault also struggled, falling by 1.66% on Thursday.

The Day Ahead

It’s a quiet day on the economic calendar. With no material stats due out of the Eurozone, the focus will be on corporate earnings and U.S GDP numbers due out later in the day.

Outside of the stats, any chatter ahead of Monday’s resumption of trade talks will also be of influence.

At the time of writing, the DAX was up by 16.5 points, while the Dow Mini was up by 51 points.