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Bob Mason

Economic Calendar:

Wednesday, 25th March

German Business Expectations (Mar)

German Current Assessment (Mar)

German IFO Business Climate Index (Mar)

French Jobseekers Total

Thursday, 26th March

GfK German Consumer Climate (Apr)

ECB Economic Bulletin


The Majors

Tuesday delivered much-needed relief for the European majors, with the DAX30 rallying by 10.98% to lead the way. The CAC40 and EuroStoxx600 saw gains of 8.39% and 8.40% respectively.

March prelim private sector PMIs failed to sink the majors, with better than expected Manufacturing numbers supporting early in the day.

Adding to the upside on the day was news of Italy showing initial signs of a slowed pace in the spread of the coronavirus. This came off the back of comments from Germany’s head of public health that the infection rate was plateauing.

Based on China and Italy’s containment measures, governments are looking at close to a 60-day period before cases begin to slow. That is for governments that have enforced strict containment measures early.

For the EU, this means that a failure to take a united approach in combatting COVID-19 leaves the need for border controls to remain in place. Restrictions will need to be in place until the final member state sees an end to the spread of the virus.

Border restrictions with non-EU countries would likely need to remain for an extended period of time, however…

From the U.S, there was also news of lawmakers edging towards a stimulus Bill that added to the upside. The gains came in spite of the coronavirus continuing to spread globally…

The Stats

It was a busy day on the Eurozone economic calendar on Tuesday. Prelim March private sector PMIs for France, Germany and the Eurozone were in focus early in the session.

In March, the French Manufacturing PMI fell from 49.8 to 42.9, with the Services PMI falling from 46.8 to 29.0. At composite level, the Composite PMI fell from 52.0 to a series low 30.2.

The Manufacturing PMI fell to an 86-month low, while the Services PMI fell to a series low.

The German Manufacturing PMI fell from 48.0 to 45.7, with the Services PMI falling from 52.5 to 34.5. At the private sector level, the Composite PMI fell from 50.7 to 37.2, which was a 133-month low.

While the manufacturing sector held up pretty well, with a 2-month low, the services sector fell to a record low in March. This is unlikely to hold, however, as the virus spread led to more stringent containment measures later in the month… New export orders in the manufacturing sector fell at the fastest pace since Apr-2009.

According to the Eurozone’s March prelim Markit Survey,

  • The Composite PMI slid from 51.6 to a record low 31.4.
  • For the Eurozone, the Manufacturing PMI slid from 49.2 to a 99-month low 44.8. The Services PMI tumbled from 52.6 to a record low 28.4.
  • At the service sector level, consumer-facing industries, including travel tourism and restaurants, were reportedly worst hit.
  • In the manufacturing sector, the slide in factory output was the largest since Apr-09, with goods orders also falling at the sharpest pace since 2009.
  • At composite level, employment fell at the steepest pace since Jul-09, the services sector worst hit.

From the U.S

March prelim private sector PMI numbers were also in focus.

In March, the U.S Manufacturing PMI fell from 50.7 to 49.2, with the Services PMI falling from 49.4 to 39.1. While the manufacturing sector held up pretty well, service sector activity took a bigger hit as expected.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector. Daimler surged by 23.82% to lead the way, with Continental and Volkswagen rallying by 14.59% and 18.52% respectively. BMW saw a more modest 12.97% gain on the day.

It was also a bullish day for the banks. Commerzbank and Deutsche Bank rallied by 10.96% and by 10.10% respectively.

Deutsche Lufthansa also found much-needed support, rallying by 11.44%.

From the CAC, it was also a bullish day for the banks. Soc Gen rallied by 12.65% to lead the way, with BNP Paribas and Credit Agricole gaining 9.26% and 7.70% respectively.

The auto sector found strong support on the day, with Renault rallying by 17.53%. Peugeot saw a more modest 10.63% gain on the day.

Air France-KLM joined its peers in the green, rallying by 13.74, while Airbus SE rose by just 1.78%.

On the VIX Index

The VIX saw its 1st day in the green in 4, rising by 0.13% on Tuesday. Following a 6.74% fall from Monday, the VIX ended the day at 61.7.

It was a choppy day on the VIX, which slid to an intraday low 36.2 in the session before climbing back to 60 levels.

While the U.S equity markets found strong support on the day, driven by stimulus plans, the coronavirus ultimately supported the VIX.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Germany’s March IFO Business Climate Index numbers are in focus going into the European session.

Following the March prelim PMI numbers from Tuesday, however, the markets will likely be somewhat resilient to weak numbers.

Both the Business Expectations and Current Assessment sub-indexes are likely to reflect the impact of the coronavirus on the German economy.

From the U.S, February durable goods orders will likely have a less material influence. As the National Guard enters key cities plagued by the virus, the news wires will likely garner greater interest.

Coronavirus numbers from Europe will need to continue to point to a plateau in the spread, however, to provide support.

In the futures markets, at the time of writing, the DAX was down by 32 points, with the Dow down by 156 points.

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