European Equities: China PMI and Trump Trade War Tactics to Test the Majors

Economic Calendar:Friday, 31st May

• German Retail Sales m/m (Apr)

• Italian CPI m/m (May)

• German CPI m/m (May)

The Majors

The European majors managed to brush aside negative sentiment through the Asian session to reduce the losses for the week.

Leading the way was the DAX30, which gained 0.54%. The CAC40 and EuroStoxx600, were not far behind, ending the day up by 0.51% and by 0.42% respectively.

As May comes rapidly to a close, the bulls will be wanting to forget about the last month. The CAC40 as down by 6.04% for the current month, with the DAX30 down by 3.58%.

The majors were saved from a late reversal on the day, with U.S President Trumps shift in trade focus towards Mexico weighing on market risk sentiment.

The Stats

Economic data released through the European session was on the lighter side on Thursday.

Spains May prelim inflation figures provided little direction for the majors on the day, in spite of softer than forecasted figures.

The annual rate of inflation eased from 1.5% to 0.8%, which was worse than a forecasted 1.2%.

The Market Movers

On the DAX, Wirecard went from worst to the best performing, rallying by 5.04%. The Thursday gain partially reversed an 8.25% slide from Wednesday.

From the auto sector, it was a mixed bag on the day. Continental managed to avoid another heavy loss, rising by 0.06%, with Volkswagen (+0.04%) also ending the day in the green. BMW (-0.06%) and Daimler (-0.17%) saw red on the day.

From the banking sector, there was more pain for Deutsche Bank and Commerzbank. The pair ended the day down by 0.23% and by 0.65% respectively.

From the CAC, BNP Paribas managed to avoid the red again, with a 0.06% gain. Credit Agricole reversed Wednesdays 0.87% loss with a 0.98% gain on the day.

The Day Ahead

Economic data due out of the Eurozone is on the heavier side in the day ahead. German prelim inflation and April retail sales are due out along with Italys prelim inflation figures.

While the markets are expecting softer inflation numbers, which would be positive for the European majors, German retail sales will be the key driver.

Retail sales are forecasted to be negative for the DAX on the day. A fall in retail sales, coupled with the rise in unemployment and deterioration in consumer and business confidence continues to paint a dark cloud over the German economy.

Later in the day, U.S inflation and personal spending figures and the May Chicago PMI will also provide direction on the day.

Outside of the stats, trade war tensions will likely overshadow the numbers, however.

At the time of writing, the DAX30 was down by 86.5 points, with the Dow Mini down by 190 points.