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Bob Mason

Economic Calendar:

Thursday, 25th April


Friday, 26th April

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The Majors

It was a mixed day for the European majors on Wednesday. The EuroStoxx600 and CAC40 fell by 0.09% and by 0.28% respectively. In contrast, the DAX rallied by 0.63% to mark a 9th consecutive day of gains.

The DAX has been playing catch-up in April, up 6.83% for the month. The CAC40 is up by 4.22%. Year-to-date, the DAX is now up 16.6%, with the CAC40 up by 17.9%.

Even the NASDAQ’s 4.82% gain for the current month pales in comparison. While the EUR’s 0.56% loss since the start of April may seem minor, sliding to sub-$1.12 levels is a significant step. A continued reversal in the EUR would support an improved earnings outlook.

May 2017 was, in fact, the last time that the EUR sat at sub-$1.10 levels… Back then, the DAX was sitting at 12,800 levels…

On the economic data front, more disappointing economic data out of Germany failed to pour cold water over the latest DAX rally.

Germany’s ifo Business Climate Index fell from 99.7 points to 99.2 points in April. In the manufacturing sector, the business climate deteriorated markedly, with pessimism also rising about the coming months. In contrast, the services sector saw a slight pickup in the business climate index, attributed to more optimistic expectations.

The results were largely aligned with the latest private sector PMI figures for April that also reflected a marked deterioration in manufacturing sector conditions.

To put it into perspective, the manufacturing Business Climate sub-Index has fallen from 25.1 in Apr-18 to 4.0 in Apr-19.

In spite of the particularly dire numbers, the DAX managed to brush off the figures.

Looking across the majors, DAX listed SAP SE led the way, surging by 12.69%. The surge came off the back of an improved outlook and a whopping 7.1% increase in its dividend payout to €1.50.

Wirecard was the 2nd best performing stock on the DAX, rallying by 6.12% on the day. The gains came off the back of news that Softbank Group would be buying a stake in the company.

The pair saved the DAX’s blushes on a day when corporate earnings out of the U.S failed to dazzle investors.

On the other end of the table, Volkswagen (-1.57%); BMW (-1.43%); and Daimler (-1.03%) all saw red following news of Nissan cutting its full-year profit forecasts. On the CAC40, Renault ended the day with a 3.55% loss.

For banking stocks, it was a mixed bag. BNP Paribas (-2%); Commerzbank (-1.28%) and UniCredit S.p.A (-1.86%) saw heavy losses, whilst Deutsche Bank held steady on the day.

Out of Europe, Credit Suisse delivered better than expected earnings results, which had a muted impact on sentiment across the sector. Concerns over the current economic environment and outlook remain negative for the sector.

The Day Ahead

There are no material stats due out of the Eurozone through the day to provide the markets with direction.

Moves through the early part of the day will likely be hinged on how the Asian markets responded to corporate earnings.

While the Asian markets will provide direction through the early part of the day, we can expect economic data out of the U.S and corporate earnings to continue influence.

On the data front, March durable goods orders are due out in the early afternoon. A rebound from weak February orders would support demand for riskier assets.

From the earnings calendar, key earnings out of Europe include those for Barclays PLC and UBS.

Out of the U.S, earnings releases include those for Amazon.com Inc., American Airlines Group Inc., Ford Motor Co., and South West Airlines.

As for European multinationals, the Dollar rebound has certainly softened the blow. Whether this is sustainable remains to be seen, however. Further declines in the EUR would certainly continue to help multinationals near-term.

At the time of writing, it was a mixed bag for the futures. The DAX30 was up 19.5 points, while the CAC40 was pointing to a 15.5 point loss at the open.

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