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European Equities: A Choppy Day Ahead as Trade Talks Resume

All eyes are on Washington today as the U.S – China trade talks are set to resume. The markets will unlikely be interested in anything else…

Economic Calendar:

Friday, 10th May

  • German Trade Balance (Mar)

  • French Non-Farm Payrolls (q/q (Q1)

The Majors

The majors finally found some support on Wednesday. The DAX led the way, gaining 0.72%, with the CAC40 up by 0.4%. Trailing the pair was the EuroStoxx600, which rose by just 0.15% on the day.

Economic data released through the European session was limited to industrial production figures out of Germany. According to figures released by Destatis, industrial production increased by 0.5% in March, coming in ahead of a forecasted 0.5% decline. Production had risen by 0.7% in February.

While the surprise increase in industrial production was positive, sentiment towards the U.S – China trade talks drove the majors through the day.

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News from the U.S Administration of China’s intent to make a trade deal ultimately delivered the gains on the day.

On the DAX, while Wirecard led the way, surging by 4.74%, Siemens rallied by 3.22% off the back of its March quarter earnings results. The Wirecard gains came from a company announcement of its plans to buy back shares.

The positive news from Washington provided support to the auto sector, with Volkswagen ending the day up 0.29%. In spite of dire earnings, BMW managed a 0.06% gain, while Daimler led the way, rallying by 2.28%.

From the banking sector, Deutsche Bank and Commerzbank rose by 0.29% and by 0.90% respectively. Better than expected industrial production figures contributed to the upside on the day. UniCredit S.p.A failed to benefit, however, falling by 0.12% as sentiment towards the Italian economy weighed. France’s BNP Paribas also struggled on the day, falling by 0.12%.

The Day Ahead

It’s a particularly quiet day ahead, with no material stats due out of the Eurozone today.

Continental, Deutsche Telekom, and UniCredit S.p.A are due to release their corporate earnings results through the day. While the results will influence the individual stocks, the results are unlikely to have a material impact on risk appetite through the day.

The majors will be in the hands of the U.S – China trade talks that are set to resume later today.

While China has indicated that it is keen to make a trade agreement, actually reaching an agreement is another story altogether. The 3-day visit was reduced to 2 and China will likely want to renegotiate certain agreements that had been made in previous talks.

Updates from talks through the day will be the key driver and there will likely be some market jitters ahead of any updates.

At the time of writing, the futures reflected the tension. The DAX30 was down by 60 points. The U.S futures were also pointing towards a bearish start to the day. The Dow Mini was down by 132 points.

This article was originally posted on FX Empire

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