European Equities: Economic Data, the Democratic Victory, and News from Capitol Hill in Focus

Economic Calendar:Thursday, 7th January

German Factory Orders (MoM) (Nov)

German IHS Markit Construction PMI (Dec)

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Italian CPI (MoM) (Dec)

Eurozone CPI (YoY) (Dec)

Eurozone Retail Sales (MoM) (Nov)

Friday, 8th January

German Industrial Production (MoM) (Nov)

German Trade Balance (Nov)

French Consumer Spending (MoM) (Nov)

Eurozone Unemployment Rate (Nov)

[fx-article-ad]The Majors

It was a particularly bullish day for the European majors, which bounced back from Tuesdays pullback.

The DAX30 rallied by 1.76% to lead the way, with the CAC40 and EuroStoxx600 gaining 1.39% and 1.36% respectively.

An EMA announcement of the recommendation for approval of the Moderna Inc. COVID-19 virus supported the majors. News of Germany extending its lockdown was muted by the vaccine news, in spite of France also facing the possibility of another lockdown.

From Capitol Hill, the Democrats looked set to take control of the Senate, raising the prospects of more fiscal stimulus, which also supported the upside.

The Stats

It was a busy day on the economic calendar, with the private sector PMI and inflation figures in focus.

Key stats included December service sector and composite PMI figures for Italy and Spain. Finalized PMIs from France, Germany, and the Eurozone were also in focus.

Italys services PMI rose from 39.4 to 39.7 in December, versus a forecasted rise to 45.3. In November, the PMI had tumbled from 46.7 to 39.4.

From Spain, the services PMI increased from 39.5 to 48.0, versus a forecasted rise to 45.0. In November, the services PMI had fallen from 41.4 to 39.5.

Frances services PMI came in at 49.1, which was down from a prelim 49.2, while up from a November 38.8.

In December, Germanys PMI rose from 46.0 to 47.0, which was down from a prelim 47.7.

For the Eurozone, the services PMI came in at 46.4, which was down from a prelim 47.3. In November, the PMI had risen from 46.9 to 41.7.

According to the December survey,

• The Composite PMI rose from 45.3 to 49.1 in December, revised down from a prelim 49.8.

• Services remained a drag on private sector output, with activity falling for a 4th consecutive month.

• Manufacturing sector activity, by contrast, expanded for a 6th consecutive month.

• Ireland sat at the top of the table, with a 4-month high composite PMI of 53.4.

• Germany ranked 2nd, with a 2-month high composite PMI of 52.0.

• Italy sat at the bottom of the table, with a 2-month high composite of 43.0.

From the U.S

It was a busy day on the economic calendar, Finalized service and composite figures were in focus along with ADP nonfarm and factory order numbers late in the European session. The stats were skewed to the negative.

ADP nonfarm employment change figures were particularly disappointing. According to the ADP, nonfarm employment fell by 123K in December, partially reversing a 304k rise in November.

In December, the Services PMI came in at 54.8 which was down from a prelim 55.3 and a November 58.4. The composite PMI came in at 55.3 which was down from a prelim 55.7 and Novembers 58.6.

On the positive, factory orders rose by 1.0% in November, following a 1.3% increase in October. Economists had forecast a 0.7% rise.

The Market Movers

For the DAX:It was a bearish day for the auto sector on Tuesday.Continentaland Daimlerslid by 1.41% and by 1.51% respectively, while BMWand Volkswagen saw relatively modest losses of 0.59% and 0.35% respectively.

It was a bullish day for the banks, however, supported the prospects of the Democratic control of the Senate. Deutsche Bankand Commerzbankrallied by 4.68% and by 5.63% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribasand Credit Agricole saw gains of 5.52% and 4.05% respectively, with Soc Gen rallying by 6.83%.

It was another mixed day for the French auto sector, however. Peugeotslid by 2.68%, while Renaultrose by 0.19%.

Air France-KLMfound much-needed support, rallying by 3.44%, with Airbus SEended the day up by 0.38%.

On the VIX Index

It was a 2nd consecutive day in the red the VIX on Wednesday, marking a 4th day in the red from 5 sessions. Following on from a 6.04% fall on Tuesday, the VIX fell by 1.07% to end the day at 25.07.

The Dow and the S&P500 rose by 1.44% and by 0.57% respectively, while the NASDAQ fell by 0.61%.

For the U.S, both the Dow and the S&P500 gave up some of their gains as protests over Trumps election loss hit Capitol Hill.

The blue wave materialized, with the Democrats taking control of the Senate. Expectations of more fiscal stimulus drove demand for banks and industrials, while tech stocks struggled. Greater regulatory oversight for the tech sector is anticipated following the Democrat victory, which weighed on the NASDAQ.

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The Day Ahead

Its a busy day ahead on the economic calendar.

Key stats include German factory orders and Eurozone retail sales figures for November.

German construction PMI and Italian and Eurozone inflation figures for December are also due out.

Barring particularly dire numbers, however, the stats are unlikely to provide the majors with direction.

From the U.S, trade data and the markets preferred ISM services PMI figures are due out.

Expect the services PMI to have the greatest impact late in the European session.

Away from the economic calendar, the outcome of the Senate race and the violence on Capitol Hill will set the tone going into the open.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 57 points.

For a look at all of todays economic events, check out our economic calendar.