It was a particularly bearish day for the European majors on Monday, with the DAX30 sliding by 2.05% to lead the way down. The CAC40 and EuroStoxx600 weren’t far behind, with losses of 2.01% and 1.58% respectively.
News of U.S President Trump reintroducing tariffs on Argentinian and Brazilian aluminum and steel exports to the U.S. offset positive stats from China and the Eurozone.
Disappointing economic data from the U.S added to the risk-off sentiment late in the session, as volumes picked up after the Thanksgiving break.
On Monday, China also announced sanctions on certain U.S NGOs and the suspension of U.S warship visits to HK in response to the signing of the HK Bill last Thursday. In spite of the relatively mild retaliation, it was Trump’s shift in focus towards LatAm that riled the markets.
The Stats
It was a busy day on the Eurozone economic calendar on Monday. Key stats included November Manufacturing PMI numbers out of Italy and Spain and finalized numbers out of France Germany and the Eurozone.
Spain’s Manufacturing PMI rose from 46.8 to 47.5 in November, coming in ahead of a forecast of 46.7. While manufacturing sector activity contracted at a slower pace, output, new orders, and employment continued to fall. The decline in new orders and output was driven by a sharper fall in new export orders.
Italy’s Manufacturing PMI decreased from 47.7 to 47.6 in November, coming in ahead of a forecast of 47.5. Manufacturing sector activity deteriorated at the fastest pace since March. Sharp declines in both output and new work weighed. More significantly, export sales contracted at the fastest pace in close to 8-years. As a result, business confidence fell to its lowest level since Dec-12.
France’s finalized Manufacturing PMI came in at 51.7, upwardly revised from a prelim 51.6 and up from an October 50.7. While there was a modest rebound in new orders, job creation accelerated at the fastest pace since July 2018. That’s good news for the ECB and domestic consumption.
Germany’s finalized Manufacturing PMI came in at 44.1, which was better than a prelim 43.8. In October the PMI had stood at 42.1. New orders fell at the weakest rate since January, with sentiment turning positive for the 1st time in 5-months. While significant, the rate of decline in output, new orders and employment fell at a slower pace.
The Eurozone’s finalized Manufacturing PMI rose from a prelim 46.6 to 46.9, and up from an October 45.9.
New orders, production, and employment weighed on the headline number.
The new orders index fell from 49.1 to 47.2, with the employment index falling from 47.7 to 46.6.
New export orders were also on the slide, with the index falling from 50.4 to 47.9.
Earlier in the day, manufacturing Data out of China and from the weekend had provided early support.
The all-important Caixin Manufacturing PMI rose from 51.7 to 51.8, which was better than a forecasted decline to 51.4.
The Market Movers
For the DAX: It was yet another bearish day for the auto sector. Daimler slid by 2.09% to lead the way down. BMW and Continental also ended the day deep in the red, with losses of 1.48% and 1.30% respectively. Volkswagen saw a more modest loss of just 0.22% on the day.
It was also a bearish day for the banks. Deutsche Bank fell by 1.02%, with Commerzbank down by 1.69%.
From the CAC, it was a bearish day for the banks. BNP Paribas slid by 1.22% to lead the way down. Soc Gen and Credit Agricole fell by 0.49% and 0.60% respectively.
The risk aversion also weighed on the French Auto sector. Peugeot fell by 1.78%, while Renault saw a more modest 0.55% loss.
On the VIX Index
The VIX came alive at the start of the week, with Trump’s latest tariff move driving volatility and demand for the safe havens.
Following on from a 7.4% rise from Friday, the VIX jumped by 18.15% on Monday to end the day at14.9.
A day high 15.3 was the highest level that the VIX has reached since mid-October.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone are limited to Spanish unemployment change figures.
The numbers are unlikely to have a material impact on the EUR, with market focus likely to be on UK Election chatter and updates from Beijing and Washington on trade.
There are also no material stats from the U.S to provide direction later in the day, which leaves the majors in the hands of Trump through the U.S session…
On Monday, Trump threatened tariffs on all French exports to the U.S in retaliation to digital taxes. The news came following the WTO findings that the EU has failed to remove all subsidies to Airbus.
Expect any further threats to rile the majors later in the day. Trump could take the opportunity to target member states including Germany…
In the futures market, at the time of writing, the DAX30 was up by 32.5 points, with the Dow up by 19 points.
