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Brexit and Updates from Capitol Hill to Test Support

The Majors

It was a bearish end to the week for the European majors on Friday. The CAC40 and EuroStoxx600 fell by 0.35% and by 0.39% respectively, with the DAX30 seeing a modest 0.27% loss.

A lack of progress towards a Brexit deal and failure by U.S lawmakers to deliver a stimulus package weighed on risk appetite.

The downside came in spite of positive economic data from Germany on the day, with renewed lockdown measures offsetting the positive numbers.

The Stats

It was a relatively quiet day on the economic calendar. Germany’s IFO Business Climate Index figures were in focus in the early part of the session.

The headline Business Climate Index rose from 90.90 to 92.10 in December. Also positive were an increase in the current assessment sub-index from 90.0 to 91.3 and a rise in the business expectations sub-index from 91.8 to 92.8.

According to the December survey,

  • Companies were more satisfied with their current business situation and less skeptical about the 6-months ahead.
  • While the latest lockdown is hitting certain sectors hard, the overall economy is showing resilience.

By Sector:

  • Manufacturing: The index saw a sharp increase, with the current situation sub-index rising to its highest level since January. Optimism towards the next 6-months also rose sharply. The sector’s Business Climate Index increased from +4.0 to +8.9 in the month. The sub-index has recovered strongly from an April low of -41.9.
  • Services: Companies were also more satisfied with the current situation and less pessimistic about the next 6-months. The COVID-19 pandemic continued to weigh on operators, accommodation services, and creative artists, however. The sector’s Business Climate Index increased from -3.1 to -0.4. In April, the sub-index had fallen to a current year low -32.7.

The trade and construction sectors delivered mixed results, however. While the Business Climate Index for the trade sector rose from -4.0 to +0.3, the index for the construction sector remained unchanged at -0.5. Increased pessimism across the construction sector offset an improved assessment of the current situation.

From the U.S

It was a quiet day on the economic calendar. Key stats included current account figures that had a muted impact on the majors.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Continental rallied by 2.54%, with BMW and Daimler seeing gains of 0.14% and 0.26% respectively. Volkswagen bucked the trend on the day, however, falling by 1.04%.

It was a bearish day for the banks, however. Deutsche Bank fell by 0.80%, with Commerzbank ending the day with a modest 0.15% loss.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 1.09% and by 0.99% respectively. Credit Agricole led the way down, however, with a 1.81% loss.

It was yet another mixed day for the French auto sector. Peugeot rose by 0.63%, while Renault fell by 1.15%.

Air France-KLM slid by a further 2.45%, with Airbus SE declining by 1.53%.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday. Following on from a 2.53% fall on Thursday, the VIX fell by 1.64% to end the day at 21.57.

The downside in the VIX came in spite of a pullback in the U.S equity markets on the day.

A lack of progress towards a COVID-19 stimulus package weighed on risk appetite at the end of the week.

The Dow and S&P500 fell by 0.41% and by 0.35% respectively, with the NASDAQ falling by a more modest 0.07% on the day.


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