It was a bearish end to the week for the European majors on Friday, with the DAX30 sliding by 1.36% to lead the way down. The CAC40 and the EuroStoxx600 saw more modest losses of 0.76% and 0.77% respectively.
A lack of progress towards a Brexit deal spooked the European majors at the end of the week. EU President Ursula von der Leyen announced that it was likely that Britain would leave the EU without a deal on Friday.
Boris Johnson made a similar concession on Friday, with French President Macron stating that there would be no compromise to fisheries and more.
Adding to the downside was a continued rise in new COVID-19 cases and disappointing COVID-19 vaccine clinical trial results. Sanofi announced that a vaccine they were working on with GlaxoSmithKline showed inadequate immune responses.
The markets were more sensitive than normal, following the ECB’s downward revision to growth forecasts for 2021 on Thursday.
A disorderly Brexit and a failure by pharmas to develop effective vaccines would leave the Eurozone economy exposed to downside risks for longer.
On the vaccine front, Pfizer Inc. and Moderna Inc. would not be able to meet global demand for 2021. Other pharmas will need to deliver in the early part of the year to bring the hope of an end to the pandemic.
The Stats
It was a relatively quiet day on the Eurozone economic calendar. Finalized inflation figures for Germany and Spain were in focus on the day.
The numbers had a muted impact on the European majors, however, with finalized figures largely aligned with prelim numbers.
An upward revision to Spain’s harmonized index for consumer prices from -0.9% to -0.8% was of little consolation as deflationary pressures lingered. Consumer prices were also down by 0.8%, year-on-year, which was in line with prelim figures.
In Germany, consumer prices were down by 0.8%, month-on-month, which was in line with prelim figures.
From the U.S
Economic data from the U.S included wholesale inflation figures for November and consumer sentiment figures for December.
While wholesale inflation figures disappointed, consumer sentiment figures came in ahead of forecasts. The Michigan Consumer Sentiment Index rose from 76.9 to 81.4 in December, according to prelim figures.
The pickup in consumer sentiment failed to shift market attention away from Brexit and the continued surge in new COViD-19 cases, however.
The Market Movers
For the DAX: It was a bearish day for the auto sector on Friday. Volkswagen and Daimler slid by 3.22% and by 2.76% to lead the way down. BMW and Continental saw more modest losses of 1.50% and 1.70% respectively.
It was also a bearish day for the banks. Deutsche Bank slid by 3.31%, with Commerzbank ending the day down by 2.27%.
From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 0.79% and by 0.63% respectively, with Soc Gen sliding by 2.46%.
It was also a bearish day for the French auto sector. Peugeot fell by 1.80%, with Renault ending the day with a 3.49% loss.
Air France-KLM fell by 3.02%, with Airbus SE declining by 1.63%.
On the VIX Index
It was a 3rd consecutive day in the green for the VIX on Friday. Following on from Thursday’s 1.12% gain, the VIX rose by 3.51% to end the day at 23.31.
Concerns over the continued rise in new COVID-19 cases and a lack of progress towards a U.S stimulus package weighed on riskier assets.
The Dow rose by 0.16%, while the NASDAQ and S&P500 fell by 0.23% and by 0.13% respectively.
The Day Ahead
It’s a relatively quiet day ahead on the economic calendar. October industrial production figures for the Eurozone are due out later today.
We don’t expect too much influence from the numbers, however. Expect market reaction to Brexit to set the tone going into the open.
While both sides failed to narrow the gap on the key differences, Boris Johnson and Ursula von der Leyen agreed to push forward with talks. The decision to continue talks should provide support going into the European open.
Later in the day, chatter from Capitol Hill will also influence. A continued failure to deliver a COVID-19 vaccine would be negative for the majors.
The Futures
In the futures markets, at the time of writing, the DAX was up by 93 points, with the Dow Mini up by 169 points.
For a look at all of today’s economic events, check out our economic calendar.
