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Brexit, COVID-19, and Capitol Hill in Focus

The Majors

A run of 3 consecutive days in the green came to an end for the European majors on Thursday. The CAC40 and the DAX30 led the way down, with losses of 1.52% and 1.24% respectively, with the EuroStoxx600 falling by 0.88%.

After the market reaction to progress towards a COVID-19 vaccine in the 1st half of the week, concerns over COVID-19 weighed.

Lockdown measures across Eurozone member states and the continued rise in new COVID-19 cases pressured the majors.

A lack of progress towards a stimulus package on Capitol Hill amidst Trump’s refusal to concede also tested support.

The Stats

It was a relatively quiet day on the Eurozone economic calendar. Key stats included Germany’s finalized inflation and Eurozone industrial production figures.

Germany

According to Destatis,

German consumer prices rose by 0.1% in October, which was in line with prelim. In September, consumer prices had fallen by 0.2%.

Compared with October 2019, the prices of goods were down by 1.5%, which was attributed to a 6.8% slump in energy products. Excluding energy products, the annual rate of inflation stood at 0.6%, while the harmonized index of consumer prices fell by 0.5%.

The Eurozone

Industrial production fell by 0.4% in the month of September, following a revised 0.6% increase in August. Economists had forecast a 0.7% rise.

According to Eurostat,

  • Production of durable consumer goods slid by 5.3%, with energy production falling by 1.0%.
  • By contrast, the production of intermediate goods rose by 0.5%, capital goods by 0.6%, and non-durable consumer goods by 2.1%.
  • Italy (-5.6%), Ireland (-4.7%), and Portugal (-3.8%) saw the largest declines.
  • Year-on-year, industrial production tumbled by 6.8%.
  • Ireland (-13.6%), Germany (-8.7%), and France and the Netherlands (both -6.1%) saw the largest decreases.

The ECB

The Economic Bulletin delivered some markets with a reality check on the day. Salient points from the minutes included:

  • The resurgence in COVID-19 infections presents renewed challenges to public health and economic growth prospects.
  • Incoming information signals that the euro area economic recovery is losing momentum more rapidly than expected.
  • Containment measures are weighing on activity, leading to a clear deterioration in the near-term outlook.
  • Incoming data for the global economy is also showing that momentum is slowing, after a strong 3rd quarter recovery.
  • Weak labor market prospects and uncertainty is weighing on consumer behavior.
  • Monetary policy measures introduced in early March are helping to preserve favorable financial conditions.
  • At the same time, however, the current environment of risks is clearly tilted to the downside.
  • December’s macroeconomic projections will allow a thorough reassessment of the economic outlook and the balance of risks.
  • Based on the projections, the Governing Council will recalibrate its instruments as appropriate.

From the U.S

Economic data included October inflation and weekly jobless claims figures.

In October, the annual core rate of inflation softened from 1.7% to 1.6%, with core consumer prices stalling in October.

Core consumer prices had risen by 0.2% in September.

Of greater interest, however, were the weekly jobless claims figures. Initial jobless claims fell from a revised 757k to 709k in the week ending 6th October.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Thursday. Daimler slid by 2.88% to lead the way down, with Continental and Volkswagen falling by 0.28% and by 0.46% respectively. BMW bucked the trend with a 0.09% gain.

It was a bearish day for the banks. Deutsche Bank fell by 1.02%, with Commerzbank ending the day with a 0.02% loss.

From the CAC, it was another bearish day for the banks, with BNP Paribas sliding by 3.76% to lead the way down. Credit Agricole and Soc Gen fell by 2.42% and by 2.10% respectively.

It was also a mixed day for the French auto sector. Peugeot fell by 2.20%, while Renault rose by 0.75%.

Air France-KLM saw a modest 0.63% loss, while Airbus SE slid by 2.75%.

On the VIX Index

It was just a 3rd day in the green from eleven for the VIX on Thursday. Reversing a 3.69% fall from Wednesday, the VIX rose by 8.10% to end the day at 25.35.

Negative sentiment towards the COVID-19 pandemic and reintroduction of containment measures weighed. A lack of progress towards a stimulus package was also negative for riskier assets on the day.

On Thursday, the Dow and the S&P500 fell by 1.08% and by 1.00% respectively. The NASDAQ ended the day with a more modest 0.65% loss.


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