In This Article:
Economic Calendar:
Tuesday, 20th August
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German PPI m/m (Jul)
Thursday, 22nd August
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French Manufacturing PMI (Aug) Prelim
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French Services PMI (Aug) Prelim
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German Manufacturing PMI (Aug) Prelim
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German Services PMI (Aug) Prelim
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Eurozone Manufacturing PMI (Aug) Prelim
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Eurozone Markit Composite PMI (Aug) Prelim
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Eurozone Services PMI (Aug) Prelim
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ECB Publishes Account of Monetary Policy Meeting
The Majors
The European majors kicked off the week with a bang. Leading the way was the CAC40, which rallied by 1.34% to reverse last week’s 0.51% loss. Close behind was the DAX30, which rose by 1.32%, reversing last week’s 1.12% slide. The EuroStoxx600 saw a more modest 1.14% gain on the day.
With economic data on the lighter side throughout the day, the market focus was on trade, with sentiment toward monetary policy playing a hand.
News of the U.S administration giving Huawei a 90-day extension gave the majors a boost. The extension allows the telco giant to continue to buy from U.S companies.
As central banks look to deliver much-needed support, governments also stepped in. German finance minister Scholz talked of fiscal support to avert any economic crisis late in the weekend.
With the German government delivering much-needed support, China’s PBoC also delivered, with reform to lending rates. Lower interest rates will reduce the cost of funds for Chinese firms, easing pressure on cash flow.
Monetary policy stimulus, fiscal stimulus, and a U.S administration taking a softer approach in the U.S – China trade war also delivered strong gains in the U.S.
The NASDAQ and S&P500 led the way with 1.35% and 1.21% gains. It was a more modest 0.96% rise for the Dow.
The Stats
On the data front, the Eurozone’s July inflation figures provided direction in the early part of the European session. The annual rate of core inflation came in at 0.9%, which was in line with prelim and forecast. The annual rate of inflation slipped to 1.0%, falling short of a prelim and forecast 1.1%.
Month-on-month, consumer prices fell by 0.5%, reversing a 0.2% rise in June. Economists had forecast a 0.4% decline.
According to Eurostat,
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The lowest annual rates of inflation were registered in Portugal (-0.7%), Cyprus (0.1%) and Italy (0.3%).
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Latvia and Slovakia reported the highest annual rate of inflation, both at 3.0%.
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In July, Services contributed 0.53 percentage points to inflation, with food, alcohol & tobacco contributing 0.37 percentage points.
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The annual rate of inflation was down from 2.2% a year ago…
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Month-on-month, the annual rate of inflation fell in 15 member states while rising in 11.