It was a bullish end to the week for the European majors on Friday. The CAC40 rallied by 2.03%, with the DAX30 and EuroStoxx600 seeing gains of 1.62% and 1.26% respectively.
Corporate earnings gave the European majors a much-needed boost on Friday to reverse most of Thursday’s losses.
Impressive earnings results for Daimler and LVMH contributed to the upside on the day.
The upside on the day came in spite of the continued spike in new COVID-19 cases, Brexit woes, and a lack of progress on Capitol Hill.
On Friday, Boris Johnson announced that trade talks with the EU are over following a failure to find common ground at the EU Summit.
From the U.S, lawmakers failed to agree on a COVID-19 stimulus bill, with the chances of a pre-election stimulus bill diminishing by the day.
Of greater immediate significance to the Eurozone’s economic recovery is the upward trend in new COVID-19 cases.
In France alone, more than 30,000 new cases had been reported in a single day as the government began reintroducing lockdown measures. As a result of the latest spike, the WHO warned that COVID-19 deaths could be 5 times higher than in April. The WHO’s projections come in response to the impact of governments easing containment measures in the summer.
The Stats
It was a relatively quiet day on the Eurozone economic calendar. Key stats included Eurozone trade data and finalized September inflation figures.
The Eurozone’s trade surplus narrowed from €27.9bn to €14.7bn.
Exports of goods to the rest of the world fell by 12.2%, compared with August 2019, to €156.3bn.
Imports from the rest of the world fell by 13.5%, compared with August 2019, to €141.6bn.
In August 2019, the trade surplus had stood at €14.4bn.
For the period January to August 2020, exports to the rest of the world fell by 12.4%, with imports down by 13.1%.
Intra-euro area trade fell by 12.3% when compared with the same period in 2019.
Inflation figures for the Eurozone also failed to impress at the end of the week, with annual inflation down by 0.3% in September. In August, annual inflation had been down by 0.2%.
Greece (-2.3%), Cyprus (-1.9%), and Estonia (-1.3%) had the lowest annual rates of inflation.
The highest contribution to the annual euro area inflation came from food, alcohol, & tobacco (+0.34 pp) and services (+0.24pp).
From the U.S
It was a busier day on the economic calendar. Key stats included October consumer sentiment figures and September retail sales and industrial production figures.
In September, core retail sales rose by 1.5%, with retail sales jumping by 1.9%. Economists had forecast increases of 0.5% and 0.7% respectively.
Consumer sentiment also improved in October, with the Michigan Consumer Sentiment Index rising from 80.4 to 81.2. The improved sentiment came in spite of the dire labor market conditions.
Concerns over slowing employment growth, a jump in COVID-19 infections, and the absence of federal relief payments weighed on sentiment towards current conditions.
The Michigan Consumer Current Conditions Index, fell while the Expectations Index rose from 75.6 to 78.8, leading to the pickup in consumer sentiment.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Friday. Daimler jumped by 4.63%, supported by impressive earnings results. Continental and Volkswagen saw gains of 2.51% and 2.17% respectively. BMW trailed, with a 1.60% rise.
It was a mixed day for the banks. Deutsche Bank rose by 2.01%, while Commerzbank fell by 1.26%
From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.71% and by 1.32% respectively. Soc Gen led the way, however, rising by 1.96%.
It was a much better day for the French auto sector, with Peugeot and Renault seeing gains of 5.49% and 5.18% respectively.
Air France-KLM reversed Thursday’s 1.90% loss, with a 1.97% gain, with Airbus SE rallying by 4.13%.
On the VIX Index
It was a 5th consecutive day in the green for the VIX. Following a 2.16% gain on Thursday, the VIX rose by 1.63% to end the day at 27.41.
The Dow and S&P500 rose by 0.39% and by 0.01% respectively, while the NASDAQ ending the day down by 0.36%.
The Day Ahead
It’s a particularly quiet day on the Eurozone economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.
The lack of stats will leave updates on COVID-19 and Brexit to influence.
From the U.S, there are also no material stats to provide direction late in the session. A lack of stats will leave the majors in the hands of chatter from Capitol Hill and the latest election polls.
Ahead of the European, 3rd quarter GDP figures from China will also set the tone.
The Futures
In the futures markets, at the time of writing, the Dow was up by 131 points, with the DAX up by 15.5 points.
For a look at all of today’s economic events, check out our economic calendar.
