The bullish week continued on Thursday. Leading the way was the DAX30 which rallied by 1.98% to log a 4th consecutive day in the green. Gains were more modest for the CAC40 and the EuroStoxx600, which rose by 1.24% and by 1.05% respectively.
Economic data took a back seat once more as the markets continued to respond to the likely outcome of the U.S Presidential Election.
Expectations of policy gridlock drove demand for the majors. While the markets are expecting Biden to win the Presidential Election, failing to win the Senate will mean that Biden’s hands are tied on repealing Trump’s policies.
All of this is considered to be the best possible outcome for the global equity markets, with the FED now tasked with supporting the economic recovery.
It was a relatively busy day on the Eurozone economic calendar. Key stats included German factory orders and construction figures and Eurozone retail sales numbers for September.
In September, factory orders rose by 0.5%, following a 4.5% jump in September. Economists had forecast a 2% rise.
According to Destatis,
- Domestic orders increased by 2.3%, while foreign orders fell by 0.8% compared with August 2020.
- New orders from the euro area slid by 6.0%, while new orders from other countries increased by 2.7%.
- The manufacturers of intermediate goods saw new orders increase by 4.0%, while new orders of capital goods fell by 2.0%.
- New orders of consumer goods rose by 2.6%.
- For the automotive industry, new orders were up by 5.1% and were 5.8% above the pre-crisis level of February 2020.
- Compared with February 2020, the month before the introduction of restrictions, new orders were down by 2.6%.
For the Eurozone, retail sales fell by 2%, however, partially reversing a 4.4% rise in August. Economists had forecast a 1% decline.
According to Eurostat,
- Non-food product sales fell by 2.6%, with the sales of food, drink, and tobacco declining by 1.4%.
- Automotive fuel sales slipped by 0.2%.
- Belgium (-7.4%), France (-4.5%), and Germany (-2.2%) reported the largest decreases in retail sales.
- Compared with September 2019, retail sales had increased by 2.2%.
German construction figures for October had a muted impact on the day.
From the U.S
Economic data was also on the quieter side. Key stats included the weekly jobless claims figures.
3rd quarter nonfarm productivity and unit labor cost numbers, also out late in the day, had a muted impact on the majors.
In the week ending 30th October, initial jobless claims came in at 751K. This was up from 758k from the week prior. Economists had forecast claims to sit at 732k.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Thursday. BMW and Daimler rallied by 3.68% and by 3.18% respectively to lead the way. Continental and Volkswagen saw more modest gains of 1.51% and of 2.85% respectively.
It was a mixed day for the banks. Deutsche Bank rose by 0.25%, while Commerzbank slid by 5.75 off the back of disappointing earnings results.
From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole saw gains of 2.29% and of 2.30% respectively. Soc Gen led the way, however, rallying by 3.73%.
It was also a bullish day for the French auto sector. Peugeot rallied by 3.11%, with Renault gaining 2.40%.
Air France-KLM eked out a 0.77% gain, with Airbus SE ending the day up by 2.62%.
On the VIX Index
It was a 4th consecutive day in the red for the VIX on Thursday. Following on from a 16.82% slide on Wednesday, the VIX fell by 6.73% to end the day at 27.58.
On Thursday, the NASDAQ rallied by 2.59%, with the S&P500 and Dow both gaining 1.95%.
The upside for the U.S majors and the downside for the VIX came on the expectation of policy gridlock on Capitol Hill.
While Joe Biden is expected to now win the Presidential Election, the Republicans are expected to retain the Senate. The expected outcome would remove policy uncertainty while placing the onus of economic support back on the FED.