European Equities: Can the Upswing Continue? New COVID-19 Cases Will Need to Slow Further…Upward momentum in the week has come off the back of falling rates of infection in China. It may be too soon, however, to thing the worst is over…
Thursday, 13th February 2020
German CPI (MoM) (Jan) Final
Friday, 14th February 2020
German GDP (QoQ) (Q4) 1st Estimate
German GDP (YoY) (Q4) 1st Estimate
Spanish CPI (YoY) (Jan) Final
Spanish HICP (YoY) (Jan) Final
Eurozone GDP (QoQ) (Q4) 2nd Estimate
Eurozone GDP (YoY) (Q4) 2nd Estimate
Eurozone Trade Balance (Dec)
It was another bullish day for the European majors on Wednesday, with a slowing number of COVID-19 cases in China providing support.
The DAX30 led the way once more, rising by 0.99%, with the CAC40 and EuroStoxx600 gaining 0.83% and 0.65% respectively. A 2nd consecutive day in the green saw the DAX30 and EuroStoxx600 hit fresh record highs.
Following a pullback on Monday, risk appetite returned mid-week, while the EUR has born the brunt of negative sentiment towards the Eurozone economy.
For the DAX30 in particular, the 1.97% fall in the EUR for the current month has certainly supported the rise to record highs. This has come at a time when banks are beginning to project a recession in Germany…
It was a relatively quiet day on the Eurozone economic calendar on Wednesday. Key stats were limited to December’s industrial production figures out of the Eurozone.
According to Eurostat, industrial production fell by 2.1% in December, following a 0.2% rise in November.
- The production of capital goods fell by 4.0%, intermediate goods by 1.7%, non-durable consumer goods by 1.3% and durable consumer goods by 1.1%.
- Energy production fell by a more modest 0.5%.
- Ireland recorded the largest monthly decline in production, with production sliding by 6.2%.
- Production in Portugal and Greece led the way up, rising by 2.9% and by 2.5% respectively.
- Year-on-year, industrial production was down by 4.1%, with Estonia (-9.9%) and Germany (-7.2%) seeing the largest slides in production.
- Average industrial production for the year 2019, compared with 2019, fell by 1.7%.
From the U.S, there were no material stats to provide direction later in the day.
The Market Movers
For the DAX: It was a particularly bullish day for the auto sector, with the big 4 in the top 5 performing stocks on Wednesday. Continental surged by 6.87% to lead the way on the DAX. BMW and Volkswagen also found strong support, rallying by 4.78% and 3.59% respectively. Daimler wasn’t far off the pace, rising by 3.09%.
The upside for the auto sector came in spite of concerns over the impact of COVID-19 on the Chinese economy and beyond.
It was also a bullish day for the banks. Commerzbank rose by 1.25%, with Deutsche Bank rallying by 3.41% on the day.
Deutsche Lufthansa was also amongst the top 10 performers on the DAX, rallying by 2.85%.
From the CAC, it was also a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.61% and by 0.37% respectively, while Soc Gen rallied by 3.78%.
The French auto sector also benefited from the risk-on sentiment, with Peugeot and Renault rallying by 4.96% and 2.07% respectively.
Air France-KLM struggled, however, ending the day down by 0.52%.
On the VIX Index
The VIX returned to the red on Wednesday, sliding by 9.49%. Reversing a 0.93% gain from Tuesday, the VIX ended the day at 13.7.
Updates from China on the spread of COVID-19 provided support to riskier assets on the day that led to record highs for the U.S majors.
COVD-19 numbers from China showed a slowing rate of infection, with the mortality rate reportedly falling to just 0.1%.
While economic disruption is anticipated, the Chinese government also vowed to deliver a stimulus package to nullify the impact of the virus on the economy.
On Wednesday, the S&P500 closed out the day with a 0.65% gain.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. Finalized inflation figures are due out of Germany, which is unlikely to have a material impact on the majors.
From the U.S, we can expect January inflation figures to influence, however.
Throughout the day, expect the news wires and updates on the spread of the coronavirus to also influence.
We’ve seen the markets respond to the falling rate of infections reported out of China. The slowdown will need to continue, not just in China but across other geographies to continue to support demand for riskier assets.
On the earnings front, Commerzbank is in focus later today.
In the futures markets, at the time of writing, the DAX was down by 7 points, with the Dow down by 92 points.