European Equities: 2nd Wave Fears Drags the Futures into the Red

The Majors

It was a mixed day for the European majors on Friday, with the CAC40 and EuroStoxx600 rising by 0.28% and by 0.28% respectively. The DAX fell for a 5^th consecutive day to buck the trend, with a 0.18% loss.

Moves on the day came in the wake of a broad-based sell-off in response to fears of a 2^nd wave and FED Chair Powell’s press conference from Wednesday.

Investors continue to buy in on the dip in spite of plenty of warnings in the week.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Friday. May’s finalized inflation figures for France and Germany were in focus along with April industrial production figures from the Eurozone.

In April, industrial production tumbled by a record 17.1%, following an 11.9% fall in March. Economists had forecast a 20% fall.

According to Eurostat,

• Production of durable consumer goods slumped by 28.9%, capital goods by 26.6%, and intermediate goods by 15.6%.
• Non-durable consumer goods and energy production fell by a more modest 11.9% and 4.8% respectively.
• By member state, Slovakia (-26.7%) reported the largest decrease in production, with all member states seeing a decline in April.
• Year-on-year, industrial production decreased by 28.0%.

On the inflation front, France saw inflationary pressures build marginally in May, while Spain saw deflationary pressures persist.

There was little influence on the European majors, however, as investors jumped in on the dip.

From the U.S

Consumer expectation and sentiment figures for June came in better than expected, providing support.

While there was an upward move, the levels remained relatively low as concerns over the pandemic and unemployment lingered.

The Michigan Consumer Expectations Index rose from 65.9 to 73.1, with the Michigan Consumer Sentiment Index rising from 82.3 to 87.8. It was good enough to support the majors on the day, however.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler rallied by 4.23% to lead the way. BMW and Continental weren’t far behind, with gains of 3.82% and 3.15% respectively. Volkswagen saw a more modest 2.62% gain on the day.

It was also a bullish day for the banks, with Deutsche Bank and Commerzbank rising by 4.27% and by 2.87% respectively.

Deutsche Lufthansa was the best performer on the day, rallying by 7.27%. On Thursday, it had been the worst performer, tumbling by 11.66%.

From the CAC, it was a bullish day for the banks, following a string of heavy losses. Soc Gen rallied by 3.24% to lead the way. Credit Agricole and BNP Paribas saw more modest gains of 0.87% and 0.63% respectively.

The auto sector also found much-needed support, with Peugeot and Renault rising by 4.18% and by 3.04% respectively.

Air France-KLM partially reversed an 8.67% slide from Thursday, with a 3.23% gain, while Airbus SE saw yet more red. Following a 10.54% tumble on Thursday, Airbus SE fell by 0.16% on Friday.

On the VIX Index

It was back into the red for the VIX on Friday, which slid by 11.52%. Partially reversing a 47.95% surge on Thursday, the VIX ended the day at 36.09.

There were no major catalysts to support demand for riskier assets, with the bulls jumping in on the dip at the end of the week.

The FED Chair, news of a pickup in new COVID-19 cases across recently reopened states and the World Bank and IMF couldn’t deliver a more material sell-off.

Expectations of further fiscal and monetary policy support will have weighed on the VIX at the end of the week.

On the day, the S&P500 rose by 1.31%, with the Dow and the NASDAQ gaining 1.90% and by 1.01% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats include finalized May inflation figures from Italy and the Eurozone’s April trade data.

We don’t expect the stats to have a material influence on the majors, however. The markets will need to consider the latest COVID-19 news from the U.S and China while looking ahead to FED Chair Powell’s testimony on Tuesday.

From the U.S, NY Empire State Manufacturing Index figures for June will draw plenty of attention. The U.S has been easing lockdown measures, which should translate into a pickup in manufacturing sector activity. Will demand be there, however?

Ahead of the European open, China’s industrial production and fixed asset investment figures for May will also influence.

On the geopolitical risk front, the markets will also need to look out from chatter from Beijing and Washington. Trump may become a little riled if this latest uptrend in new coronavirus cases continues.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 124,839 to 7,984,332. On Saturday, the number of new cases had risen by 140,913. The daily increase was lower than Saturday’s rise while up from 123,802 new cases from the previous Sunday.

Germany, Italy, and Spain reported 909 new cases on Sunday, which was down from 914 new cases on Saturday. On the previous Sunday, 610 new cases had been reported.

From the U.S, the total number of cases rose by 19,920 to 2,162,144 on Sunday. On Saturday, the total number of cases had risen by 26,905. On Sunday, 7^th June, a total of 20,274 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 96.5 points, with the Dow down by 330 points. Fears of a 2^nd wave COVID-19 pandemic weighed on riskier assets early on.

For a look at all of today’s economic events, check out our economic calendar.