European Equities: Can Lagarde and the ECB Deliver Support?

With the spread of the coronavirus continuing and no economic data to consider, the news wires contributed to the downside.

Earnings were also in focus, with Adidas missing 4^th quarter forecasts and issuing a warning of a marked slide in China sales for Q1.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday, with no material stats to provide direction.

A lack of stats was ultimately a positive early in the day, with no weak numbers to spook the markets on the day.

From the U.S, February inflation figures failed to impact, as the markets continued to price in a 2^nd rate cut next week.

On the news wires, coronavirus cases in Italy broke through 10,000, with 631 confirmed deaths. In the U.S, the number of cases hit 1,000 on Wednesday.

For the Italian government, the jump in cases will be of concern, particularly when considering the containment measures in place. Too little, too late maybe the general consensus, which then raises questions over containment measures elsewhere…

The Market Movers

For the DAX: it was a bearish day for the auto sector. Continental slid by 5.46%, with BMW, Daimler, and Volkswagen falling by 4.42%, 5.16%, and 5.28% respectively.

It was also a bearish day for the banks, with Commerzbank and Deutsche Bank sliding by 3.11% and 6.55% respectively.

Deutsche Lufthansa ended the day down by 7.61%, following a 1.00% loss on Tuesday.

Adidas was the worst performer on the day, however, with a 13.90% tumble.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 2.97% and 3.39% respectively. Credit Agricole saw a more modest 2.44% gain on the day.

It was also a positive day for the auto sector, with Peugeot and Renault rising by 1.44% and by 3.44% respectively.

Air France-KLM slid by 3.82%, however, following a 1.93% decline on Tuesday. The loss on the day was modest relative to Airbus SE, which fell by 4.37%.

On the VIX Index

The upward trend for the VIX resumed on Wednesday, with the VIX rising by 13.95%. Reversing a 13.15% slide from Tuesday, a 4^th day in the green out of 5 left the VIX at 53.9.

A slide in the U.S equity markets delivered the upside on the day, as the U.S majors joined their European peers in bearish territory.

The S&P500 slid by 4.89%, as the World Health Organization declared the coronavirus a global pandemic.

Travel and tourism stocks took a hammering, with Boeing tumbling by a whopping 18.15% to lead the way down on the Dow.

With the virus showing no signs of abating, uncertainty over just how much damage the virus will have on the global economy remained.

At the time of writing, the U.S government had yet to push through planned fiscal support, which left the majors on the back foot.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Eurozone industrial production figures for January are due out later this morning. With the January numbers too early to reflect the effects of the coronavirus, we would expect any positive numbers to be brushed aside.

Italy’s shutdown in the north and the spread of the virus across Europe suggests some dire numbers ahead. And that’s before factoring in an expected slide in demand from the East and the effects of supply chain disruption.

Outside of the numbers, however, the ECB monetary policy decision and press conference will be the main event on the calendar.

Expect a slide in the majors should the ECB decide to leave interest rates unchanged…

Any chatter from governments and news updates on the spread of the coronavirus will also be in focus throughout the day.

In the futures markets, at the time of writing, the Dow was up by 246 points.