European Equities: Economic Data out of China Spurs the Bulls into Action

The Majors

A bullish end to the quarter on Friday came on what was a relatively busy day on the economic calendar. Better than expected retail sales and unemployment numbers out of Germany provided plenty of relief, though it wasn’t all positive. Spain’s economy grew at a slower pace than had been previously estimated. Consumer spending in France also disappointed, though the fall in spending may have had more to do with protests.

In spite of the mixed numbers, risk appetite supported Friday’s gains to end the quarter on a high note.

When considering the negative sentiment surrounding the Eurozone economy, the CAC and DAX gained 13.1% and 9.2% respectively over the quarter. Not bad considering the doom and gloom and the effects of the ongoing trade war between the U.S and China.

There wasn’t much red on the DAX at the end of the week, with Daimler and Volkswagen seeing amongst the best returns on the day.

In spite of the upward momentum, both Deutsche Bank and Commerzbank saw red once more. The pullback bucked the trend from the sector, with BNP Paribas managing a 1.49% rise and Italy’s UniCredit S.p.A rising by 0.88%.

The upward moves came as the U.S Treasury 3-month / 10-year inverted yield curve returned to a positive yield curve.

While Theresa May stumbled at a 3^rd time of asking, the UK Parliament rejecting her deal once more, positive updates from the U.S – China trade talks supported risk appetite on the day.

The Day Ahead

It’s a busy day ahead on the economic calendar. Finalized manufacturing PMI numbers are due out of France, Germany, and the Eurozone. Ahead of the finalized figures, the one-time monthly release of manufacturing PMI numbers out of Spain and Italy will also be in focus.

Influence will come from any revisions to Germany’s manufacturing PMI, with Italy’s PMI to also have an impact.

While we can expect some influence from the numbers, better than expected manufacturing PMI numbers out of China from the weekend and this morning have ultimately set the tone.

The China manufacturing sector’s return to expansion can only be a good thing for the Eurozone, which has been under China’s dark shadow since late last year.

Of less influence on the majors will be the Eurozone’s prelim inflation figures for March. Core inflation is unlikely to edge too far beyond 1.0%, which continues to sit well below the ECB’s target. The lack of inflation will ultimately allow the ECB to ease policy further should the need arise.

Through the U.S session, February retail sales figures and the March ISM manufacturing PMI could sour the mood should the numbers be weaker than forecast. How much impact any disappointing numbers will have remains to be seen, however. China’s doom and gloom and concerns over trade talks have weighed on risk appetite. Positive sentiment towards both should deliver strong gains barring another yield curve inversion.

At the time of writing, the DAX30 futures were up by 115.5 points, with the CAC40 futures was up by 53.5 points.

U.S Treasury 3-month yields stood at 2.38% at the time of writing, while 10-year yields stood at 2.43%, supporting a 162 point rise in the Dow Jones mini early on.