Economic Data, COVID-19, and the Georgia Runoff in Focus

The Majors

It was a relatively bullish start to the year for the European majors on Monday. The CAC40 and the EuroStoxx600 saw gains of 0.68% and 0.67% respectively, while the DAX30 rose by just 0.06%.

A wrap up of the Brexit agreement and the continued vaccination across the EU supported the majors.

After the holiday season, it was the first full session for the markets to react to Britain leaving the EU with a deal.

Optimism towards a strong economic recovery also supported the European majors. The aggressive vaccination plans raised hopes of a speedier economic recovery.

Over the holidays, AstraZeneca had received approval by the UK’s MHRA. Expectations are for the EMA to eventually follow suit…

The upside on the day came in spite of the U.S rolling out tariffs on EU goods that include EU liquor and aircraft parts.

Stocks pared gains from the early part of the day, however, with the Georgia runoff and a spike in new COVID-19 cases in the U.S weighing.

The Stats

It was a particularly busy day on the economic calendar. December manufacturing PMI figures for Italy and Spain were in focus. Finalized PMI numbers for France, Germany, and the Eurozone also drew attention on the day.

In December, Italy’s Manufacturing PMI increased from 51.5 to 52.8, versus a forecasted rise to 53.7. In November, the PMI had fallen from 53.8 to 51.5.

Spain’s manufacturing PMI increased from 49.8 to 51.0, versus a forecasted rise to 52.8. In November, the PMI had fallen from 52.5 to 49.8.

For France, the manufacturing PMI came in at 51.1, which was in line with a prelim 51.1 and up from a November 49.6.

Germany’s manufacturing PMI came in at 58.3, which was down from a prelim 58.6, while up from a November 57.8.

The Eurozone PMI

The Eurozone’s finalized Manufacturing PMI came in at 55.2. This was down from a prelim 55.5, while up from a November 53.8. In November, the Manufacturing PMI had fallen from 54.8 to 53.8.

According to the December survey,

  • The Eurozone manufacturing PMI improved to its highest level since May 2018.
  • While all three sectors recorded a further improvement, some sectors performed better than others.
    • Investment goods producers recorded the strongest improvement, followed by intermediate goods.
    • By contrast, only marginal strengthening in operating conditions was seen amongst consumer goods producers.
  • New export orders increased markedly and to a greater extent than in November.
  • While capacity pressures remained, firms on average made further cuts to staffing levels, marking a 20th consecutive month of cuts.
  • In spite of this, optimism reached its highest level in nearly 3-years

By member state,

  • Germany ranked 1st, with a 34-month high 58.3, with the Netherlands coming in 2nd, with a 27-month high 58.2.
  • Ireland ranked 3rd with a 5-month high 57.2, while Greece sat at the bottom of the table with a 2-month high 46.9. Greece was the only member state that saw its manufacturing sector contract in December.

From the U.S

The finalized manufacturing PMI for December was also in focus.

In December, the Manufacturing PMI came in at 57.1, which was up from a prelim 56.5. In November, the PMI had risen from 53.4 to 56.7.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Monday. Continental and Volkswagen slid by 3.51% and by 2.39% respectively. BMW and Daimler saw more modest losses of 0.60% and 1.54% respectively.

It was also a bearish day for the banks. Deutsche Bank fell by 2.00%, with Commerzbank declining by 0.72% on the day.

From the CAC, it was a bearish day for the banks, which gave up gains from earlier in the day. BNP Paribas and Credit Agricole fell by 0.22% and by 0.97% respectively, with Soc Gen sliding by 1.88%.

It was a mixed day for the French auto sector. Peugeot rose by 1.70%, while Renault ended the day flat.

Air France-KLM slid by 4.88%, while Airbus SE ended the day up by 0.12%.

On the VIX Index

It was back into the green after 2 consecutive days in the red for the VIX on Monday. Following a 0.09% decline on Thursday, the VIX jumped by 18.55%, to end the day at 26.97.

The NASDAQ and the S&P500 slid by 1.47% and by 1.48% respectively, with the Dow ending the day down by 1.25%.

A spike in new COVID-19 cases and market jitters ahead of the Georgia runoff left the majors in the red.

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