August’s prelim private sector PMIs from France, Germany, and the Eurozone and U.S PMIs will be the key drivers.
German Manufacturing PMI (Aug) Prelim
German Services PMI (Aug) Prelim
Eurozone Manufacturing PMI (Aug) Prelim
Eurozone Markit Composite PMI (Aug) Prelim
Eurozone Services PMI (Aug) Prelim
It was a bearish day for the European majors on Thursday. The CAC40 fell by 1.33% to lead the way down. It wasn’t much better for the DAX30 and EuroStoxx600, which saw losses of 1.14% and 1.07% respectively.
A combination of disappointing U.S data and market reaction to Wednesday’s FOMC meeting minutes did the damage.
The FOMC meeting minutes had been released after the European close on Wednesday, with the FED delivering a gloomy outlook on the economy.
Following the FOMC meeting minutes, the ECB’s monetary policy meeting minutes provided little comfort.
It was a relatively quiet day on the Eurozone economic calendar. Key stats included July wholesale inflation figures for Germany.
According to Destatis,
The Producer Price Index increased by 0.2% in July, after having stalled in June. Economists had forecast a 0.1% rise.
Year-on-year, the index of producer prices fell by 1.7%.
On an annual basis, prices of petroleum products were down 16.7%, prices of natural gas (distribution) decreased by 14.1%.
The overall index, disregarding energy was down 0.5% from July 2019.
Prices of intermediate goods decreased by 2.3%, while prices of non-durable consumer goods increased by 0.5%.
Compared to July 2019, prices of capital goods increased by 1.1% and durable consumer goods by 1.6%.
On the monetary policy front, the ECB’s monetary policy meeting minutes also drew attention. According to the latest minutes,
Financial market conditions had continued to normalize since the June meeting. They remained tighter and more fragile than before the pandemic, however.
There was some caution over the recent positive market developments that were not fully backed by economic data. This might be based on overly optimistic expectations about the European Council’s recovery package. Hopes of progress in developing a vaccine had also supported the equity markets.
Members agreed that a highly accommodative monetary policy stance continued to be appropriate. A subdued medium-term outlook for price stability and significant economic slack supported this.
Uncertainty about the economic outlook remained elevated.
The risk of a persistent increase in the unemployment rate and uncertainty about the extent to which the corporate sector could face solvency issues were highlighted.
It was noted that a number of temporary fiscal measures were likely to expire in the autumn. This would leave businesses more directly exposed to the impact of the pandemic shock. The ECB would consider these factors and additional information available in the autumn to adjust monetary policy if required.
From the U.S
It was a relatively busy day on the economic calendar. August’s Philly FED Manufacturing Index and the weekly jobless claims were in focus.
In August, the Philly FED Manufacturing Index fell from 24.1 to 17.2. Economists had forecast a decline to 21.0. The employment sub-index declined from 20.1 to 9.0.
In the week ending, 14th August, initial jobless claims came in at 1.106m, which was up from 971k in the week prior. Economists had forecast 925k claims.
The Market Movers
For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen slid by 2.02% to lead the way down. BMW and Continental weren’t far behind, with losses of 1.22% and 1.75% respectively. Daimler fell by a more modest 0.98% on the day.
It was also a bearish day for the banks. Deutsche Bank reversed Wednesday’s 2.59% gain, falling by 2.45%, with Commerzbank sliding by 3.66%.
From the CAC, it was a bearish day for the banks. BNP Paribas fell by 2.39%, with Credit Agricole and Soc Gen sliding by 2.71% and by 2.62% respectively.
It was also a bearish day for the French auto sector. Peugeot and Renault ended the day with losses of 3.08% and 4.86% respectively.
Air France-KLM fell by 2.45%, with Airbus SE declining by 1.54% on the day.
On the VIX Index
It was a 3rd consecutive day in the green for the VIX on Thursday. Following on from a 4.79% gain on Wednesday, the VIX rose by 0.80% to end the day at 22.72.
The S&P500 and NASDAQ rose by 0.0.32% and by 1.06% respectively, with the Dow gaining 0.17%.
A gloomy FED and disappointing economic data from the U.S supported the VIX on the day.
The Day Ahead
It’s a busy day ahead on the Eurozone economic calendar. Key stats include August’s prelim private sector PMIs for France, Germany, and the Eurozone.
Later in the day, August consumer confidence figures for the Eurozone will also be in focus.
Expect the prelim numbers to have a material impact on the majors on the day.
From the U.S, prelim private sector PMIs for August will also provide direction. The numbers are due out ahead of the Eurozone’s consumer confidence figures.
Away from the economic calendar, a number of key areas of focus remain. These include COVID-19 news, U.S – China tensions, and any updates on the U.S COVID-19 stimulus package.
In the futures markets, at the time of writing, the DAX was up by 83 points, with the Dow up by 92 points.