European Equities: It Could be a Choppy Day Ahead

Economic Calendar:Friday, 3rd May

Eurozone Core CPI (YoY) (Apr) Prelim

Eurozone CPI (YoY) (Apr) Prelim

The Majors

It was a mixed day for the European majors after the Labour Day holiday.

The DAX eked out a 0.01% gain to maintain its upward trajectory. Hitting reverse, the EuroStoxx600 and CAC40 saw red on the day. While the EuroStoxx600 fell by 0.58%, the CAC40 was the worst performing major index, falling by 0.85% on the day.

Economic data released through the European session was on the heavier side. Key stats included March German retail sales figures and April manufacturing PMI numbers.

According to figures released by Destatis.de, retail sales slipped by 0.2% in March, which was better than a forecasted 0.4% decline. Year-on-year, sales were down by 2.1%. The figures were somewhat better for the 1st quarter when compared to the 1st quarter of last year, with sales up by 1.7%.

On the manufacturing PMI numbers, Italy and Spain posted better than expected PMIs. While Italys manufacturing PMI continued to reflect a contraction, the pace of deceleration was marginal.

Things were less impressive for Germany. The finalized April PMI came in at 44.4, which was worse than a prelim 44.5. While worse than prelim numbers, the PMI did rise from a March 44.1… In spite of the slight improvement, Germanys manufacturing sector was the worst performing across the Eurozone in April.

For the Eurozone, however, the manufacturing PMI stood at 47.9, which was just above a prelim 47.8. According to the April survey, Greece led the way, with the PMI hitting a 226-month high 56.6 in April. For France, a 2-month high 50.0 failed to support the CAC40.

FED Chair Powells comments from the FOMC press conference on Wednesday weighed on the major bourses through the day. The stats also contributed to the negative sentiment on the day.

Corporate earnings provided the necessary support from the DAX, along with a pullback in the EUR and strong factory order figures out of the U.S.

Volkswagen reported in-line with expected earnings for the 1st quarter, supporting a 2.92% gain on the day. The in-line with forecasted earnings failed to support the broader sector, however. BMW and Daimler fell by 0.66% and by 0.02% respectively.

From the CAC40, BNP Paribas reported a 22.4% year-on-year jump in net income, which provided much-needed support to the banking sector. BNP Paribas ended the day up 1.16%.

Commerzbank and Deutsche Bank rose by 0.9% and 0.33% respectively on the day. UniCredit S.p.A also saw green rising by 0.39%.

The Day Ahead

For the day ahead, it‘s a relatively quiet day on the economic data front. Key stats due out of the Eurozone are limited to the Eurozone’s prelim April inflation figures.

While forecasts are for the annual rate of core inflation to pick up to 1.1%, theres unlikely to be any material shift in sentiment towards ECB monetary policy.

The Eurozone may have seen better economic growth in the 1st quarter, but the manufacturing sector PMIs continue to report doom and gloom across a number of key economies.

While the Eurozone numbers are unlikely to impact, nonfarm payroll, wage growth and ISM non-manufacturing PMI numbers due out of the U.S will likely have an impact. Forecasts are skewed to the positive.

On the earnings front, there are no major corporate earnings due out through the day to provide direction.

At the time of writing, the futures were pointing to a slide at the open. The DAX30 was down by 19.5 points, with the CAC40 was pointing to a 41.5 point slide at the open.