European Equities: A Lack of Stats Leaves COVID-19 and Geopolitics in Focus

The Majors

It was a relatively bullish end to the week for the European majors on Friday. The DAX30 and the EuroStoxx600 rose by  0.87% and by 0.91% respectively, with the CAC40 gaining 0.61%.

Positive economic data from Germany continued to provide the majors with support, following Merkel’s mid-week U-Turn on lockdown measures.

COVID-19 jitters continued to pin the European majors back, however, in spite of impressive manufacturing PMIs for March earlier in the week.

Another cause for concern for the markets will be the rise in tensions between China and the West.

Sanctions and more could see relations deteriorate rapidly as the EU and Britain also get drawn in.

The Stats

It was a relatively busy day on the economic calendar on Friday. On the economic data front, German business sentiment figures were in focus early in the day.

In March, Germany’s IFO Business Climate Index increased from a revised 92.7 to 96.6.

Supporting the uptick in the headline figures was a jump in the business expectations sub-index from a revised 94.2 to 100.4.

The current assessment sub-index was also on the rise, increasing from 90.6 to 90.3.

According to the March IFO Survey,

• Manufacturing company optimism reached levels not seen since November 2010.
• Service sector optimism returned for the first time since the fall, supporting a pickup in the sector’s Business Climate Index.
• In trade, the Business Climate Index surged in March, with both the current situation and business expectations seeing sharp increases.

Economists had forecast the IFO Business Climate Index to rise to 93.2. Both the expectations and sentiment sub-indexes also came in ahead of forecasts of 95.0 and 91.3 respectively.

The pickup in sentiment was aligned with the marked pickup in Germany’s private sector activity through the 1^st quarter.

Finalized 4^th quarter GDP numbers from Spain had a muted impact on the majors, in spite of a downward revision to prelim figures.

From the U.S

It was a relatively busy day. Key stats included personal spending and inflation figures.

The stats were skewed to the negative. Inflationary pressures softened, with personal spending falling by more than expected.

In February, the Core PCE Price Index rose by 1.4% year-on-year, which was down from a 1.5% increase in January.

Personal spending fell by 1.0% in February, month-on-month, partially reversing a 3.4% rise from January. Economists had forecast a 0.7% decline.

Other stats included trade data and finalized consumer sentiment figures that had a muted impact on the markets.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Daimler rose by 1.33% to lead the way, with BMW and Volkswagen rising by 0.34% and 0.22% respectively. Continental bucked the trend, however, falling by 0.22%.

It was also a mixed day for the banks. Deutsche Bank ended the day flat, while Commerzbank fell by 0.23%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.65% and by 1.58% respectively, with Soc Gen gaining 1.81%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 1.61%, while Renault ended the day with a 0.83% loss.

Air France-KLM eked out a 0.06% gain, with Airbus SE rising by 1.23% on the day.

On the VIX Index

It was a 2^nd consecutive day in the red for the VIX on Friday.

Following on from a 6.56% decline on Thursday, the VIX fell by 4.80% to end the day at 18.86.

The S&P500 rose by 1.66%, with the Dow and the NASDAQ gaining by 1.39% and 1.24% respectively.