Futures point to the red as the markets respond to the end of stimulus talks. Brexit, economic data, and U.S politics are in focus today.
Thursday, 8th October
German Trade Balance (Aug)
ECB Monetary Policy Meeting Minutes
It was another bullish day for the European majors on Tuesday, with the DAX30 rising by 0.61% to lead the way. The CAC40 and EuroStoxx600 saw more modest gains of 0.48% and 0.07% respectively.
Economic data from Germany and Trump’s return to the Oval Office provided support. The upside was limited, however, with a rise in new COVID-19 cases and new containment measures in EU testing support.
Late in the day, news hit the wires of Trump ending relief bill negotiations on Capitol Hill until after the election. The European markets had closed, with the announcement sending the U.S majors into the red.
It was a relatively quiet day on the Eurozone economic calendar.
Key stats included August factory orders and September’s construction PMI figures from Germany.
In August, factory orders jumped by 4.5%, coming in well ahead of a forecasted 2.6% rise. In July, factory orders had risen by 2.8%.
According to Destatis,
Domestic orders increased by 1.7% and foreign orders by 6.5%, month-on-month.
New orders from the euro area jumped by 14.6%, with orders from other countries rising by 1.5%.
The manufacturers of intermediate goods increased by 4.5%, with manufacturers of capital goods seeing a 4.7% rise.
Consumer goods producers saw new orders increase by 4.2%.
For the auto sector, orders increased by 0.9%, which took orders to above pre-crisis levels.
New orders in the manufacture of machinery and equipment rose by 11.4%. In spite of the increase, orders were still 5.8% below February 2020 levels.
While factory orders were positive, Germany’s construction PMI slipped from 48.0 to 45.5. The PMI had a muted impact on the DAX30, however, after impressive service and manufacturing PMIs and factory orders.
From the U.S
It was a relatively busy day on the economic calendar. Key stats included August trade figures and JOLTs job openings.
In August, the trade deficit widened from $63.4bn to $67.1bn. Economists had forecast a widening to $66.1bn.
While exports rose from $168.1bn to $171.9bn, imports increased from $231.7bn to $239.0bn.
JOLTs job openings were also disappointing, with openings coming in at 6.493m. This was below a forecasted 6.685m and down from 6.697m in July.
On the monetary policy front, FED Chair Powell was also in focus late in the European session. The FED Chair called for more help from the U.S government, warning of a weak economic recovery if more stimulus is not delivered.
The Market Movers
For the DAX: It was a mixed day for the auto sector on Tuesday. Volkswagen rose by 0.74% to buck the trend on the day. Daimler fell by 1.29%, to lead the way down, with BMW and Continental seeing losses of 0.22% and 0.55% respectively.
It was also another bullish day for the banks, however. Deutsche Bank and Commerzbank rallied by 4.55% and by 6.43% respectively.
From the CAC, it was a particularly bullish day for bank stocks. Soc Gen jumped by 6.71%, with BNP Paribas and Credit Agricole ending the day up by 5.02% and by 5.23% respectively.
It was also another bullish day for the French auto sector. Peugeot and Renault rose by 1.38% and by 5.00% respectively.
Air France-KLM rallied by 4.40% off the back of a 4.35% gain on Monday, with Airbus SE ending the day with a 2.99% gain.
On the VIX Index
It was a 6th consecutive day in the green for the VIX on Tuesday. Following a 1.19% gain from Monday, the VIX rose by 5.44% to end the day at 29.48.
Trump’s decision to end stimulus talks until after the U.S Presidential Election weighed on the U.S majors on Tuesday.
The decision came after Powell’s call for more support and warning of a slow economic recovery should Congress fail to pass a relief bill.
The Dow and S&P500 fell by 1.34% and by 1.40% respectively, while the NASDAQ declining by 1.57%.
The Day Ahead
It’s another relatively quiet day on the Eurozone economic calendar.
Key stats include Germany’s industrial production figures for August.
Following a string of impressive numbers, the markets will be expecting another solid rise in production.
On the monetary policy front, ECB President Lagarde is scheduled to speak, which could also influence later in the day.
Away from the economic calendar, Brexit talks resume and will likely garner plenty of attention.
From the U.S, there are no material stats due out to provide the majors with direction. After the European close, the FOMC minutes are due out. Apprehension ahead of the FOMC minutes could limit any upside on the day.
We can expect the majors to react to Trump’s call to end stimulus talks, however.
In the futures markets, at the time of writing, the Dow was down by 47 points, with the DAX down by 96.5 points.