It’s a quiet day on the economic calendar, leaving the majors in the hands of geopolitics and COVID-19 news updates.
German Ifo Business Climate Index (Aug)
Friday, 28th August
GfK German Consumer Climate (Sep)
French Consumer Spending (MoM) (Jul)
French GDP (QoQ) (Q2) Final
It was a bearish end to the week for the European majors on Friday. The DAX30 fell by 0.51%, with the CAC40 and EuroStoxx600 seeing losses of 0.30% and 0.15% respectively.
Economic data from the Eurozone weighed on the European majors on the day. The markets hope of a v-shaped economic recovery were dashed on Friday, as the Eurozone’s PMIs fell to 2-month lows.
The downside for the European majors was limited, however, with positive PMIs from the U.S providing support. Economic data from Thursday and the FOMC meeting minutes had weighed on the majors on Thursday.
Adding to the market angst on the day was uncertainty over what lies ahead for China, the U.S, and the trade agreement.
Tensions have flared as Trump targets China’s tech stocks. At the end of the week, the administration held back from affirming Beijing’s announcement that trade talks were set to resume.
It was a busy day on the Eurozone economic calendar. Key stats included August’s prelim private sector PMIs from France, Germany, and the Eurozone.
In August, the French manufacturing PMI slid from 52.4 to 49.0, with the services PMI falling from 57.3 to 51.9. Economists had forecast PMIs of 53.7 and 56.2 respectively.
From Germany, the manufacturing PMI rose from 51.0 to 53.0, while the services PMI slid from 55.6 to 50.8. Economists had forecast PMIs of 52.5 and 55.1 respectively.
For the Eurozone, the manufacturing PMI fell from 51.8 to 51.7, with the services PMI declining from 54.7 to 50.1. Economists had forecast PMIs of 52.9 and 54.5 respectively.
The Eurozone’s composite PMI fell from 54.9 to a 2-month low 51.6. Economists had forecast for the PMI to hold steady at 54.9.
According to the prelim Markit Survey,
Business activity and new orders rose modestly, and at slower rates than in July.
While new orders increased for a 2nd consecutive month, new export orders fell. Travel restrictions due to a jump in new COVID-19 cases weighed on new business from abroad for service providers.
Companies across the Eurozone continued to reduce workforce numbers.
While the focus has been on service sector activity, the one highlight was a sharp rise in manufacturing production. The Manufacturing PMI Output Index rose to a 28-month high in August.
At the composite level, weakness in the service sector weighed in August.
From the U.S
It was another relatively busy day on the economic calendar. August’s prelim private sector PMIs were in focus late in the European session.
The Services PMI rose from 50.0 to a 17-month high 54.8, with the PMI rising from 50.9 to a 19-month high 53.6.
The Market Movers
For the DAX: It was a bearish day for the auto sector on Friday. Daimler slid by 2.14%, with BMW falling by 1.10%. Continental and Volkswagen saw more modest losses of 0.81% and by 0.39% respectively.
It was also a bearish day for the banks. Deutsche Bank fell by 1.30%, with Commerzbank declining by 0.24%.
From the CAC, it was a bearish day for the banks. Soc Gen slid by 1.98% to lead the way down. BNP Paribas and Credit Agricole fell by 1.65% and by 1.54% respectively.
It was also another bearish day for the French auto sector. Peugeot and Renault ended the day with losses of 2.05% and 0.69% respectively.
Air France-KLM bucked the trend, rising by 1.78%, while Airbus SE slipped by 0.13% on the day.
On the VIX Index
It was back into the red for the VIX, which ended a run of 3 consecutive days in the green on Friday. Reversing a 0.80% gain from Thursday, the VIX fell by 0.79% to end the day at 22.54.
The S&P500 and NASDAQ rose by 0.34% and by 0.42% respectively, with the Dow gaining 0.69%.
Positive private sector PMIs for the U.S overshadowed rising tensions between the U.S and China on the day.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats from the Eurozone or the U.S to provide direction on the day.
A lack of stats will leave chatter from Beijing and Washington and the latest COVID-19 numbers to influence. Any progress on the U.S COVID-19 stimulus package will also provide direction.
In the futures markets, at the time of writing, the DAX was up by 52.5 points, with the Dow up by 63 points.