European Equities: Corporate Earnings and COVID-19 in Focus

The Majors

It was a bullish start to the week, with the European majors finding strong support to reverse losses from last week.

The DAX30 rallied by 3.13% to lead the way, with the CAC30 and EuroStoxx600 rising by 2.55% and by 1.77% respectively.

With no material stats to rock the boat, hopes of more stimulus for COVID-19 stricken economies provided support on the day.

From the weekend, a downward trend in new coronavirus cases across the EU was also market positive. There had been a spike on Friday before the weekend slowdown.

Earnings added to the upside at the start of the week, as did badly hit airline stocks in response to hopes of government moves to support the sector.

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. Key stats were limited to jobseeker figures from France that had a muted impact on the majors.

Jobseekers rose from 3,245.6k to 3,488.6k in March, with the figures brushed aside by the European majors.

Earlier in the day, the markets took dire March industrial profit figures out of China in their stride.

In March, industrial profits tumbled by 34.9% year-on-year, following a 6.3% decline in February. Year-to-date, industrial profit slid by 36.7%, which was marginally better than a 38.3% slump to February.

On the monetary policy front, the BoJ delivered its April policy decision early. While holding interest rates unchanged, the BoJ pledged to remove all limits on its bond-buying program to support the economy. The Bank also announced plans to increase the cap on corporate and commercial debt purchases.

There were no stats from the U.S later in the day to provide the European majors with direction.

The Market Movers

For the DAX: It was a bullish start to the week for the auto sector. Continental rallied by 5.45% to lead the way, with Daimler up by 4.42%. BMW and Volkswagen weren’t far behind, however, with gains of 3.99% and 2.96% respectively.

It was a particularly bullish day for the banks. Deutsche Bank surged by 11.35%, with the jump coming off the back of better than expected 1^st quarter earnings. Commerzbank rose by 5.91% on the day.

Deutsche Lufthansa was on the move alongside Deutsche Bank, rallying by 11.83%. Hopes of a government rescue package for the COVID-19 stricken airline delivered the upside on the day.

From the CAC, the banking sector found strong support on Monday. BNP Paribas rallied by 5.67%, with Credit Agricole and Soc Gen rising by 4.52% and 5.05% respectively.

The auto sector also saw green. Renault jumped by 9.86%, with Peugeot rising by 1.66%.

Air France-KLM saw a more modest 0.85% gain, while Airbus SE bucked the trend with a 2.43% slide.

On the VIX Index

It was a 4^th consecutive day in the red for the VIX on Monday. Following on from a 13.17% slide on Friday, the VIX fell by 7.35% to end the day at 33.3.

Government plans to ease lockdown measures and a downward trend in the number of new coronavirus cases drove demand for U.S equities.

The S&P500 rose by 1.47%, with the Dow and NASDAQ gaining 1.51% and by 1.11% respectively.

The Day Ahead

It’s another quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the majors with direction through the early part of the day.

Expect sentiment towards further fiscal and monetary policy stimulus to remain the key driver as the markets look towards Brussels to deliver more.

With governments beginning to ease lockdown measures, the general trend in new coronavirus cases across the EU was also of influence.

On Monday, the number of new coronavirus cases rose by 66,953 to 3,059,081. On Sunday, the number of new cases had risen by 71,251.

France, Germany, Italy, and Spain reported 8,938 new cases on Monday, which was up from 7,063 new cases on Sunday. A rise in new cases from France led to the EU’s day on day increase, while the downward trend continued.

From the U.S, the total number of cases rose by 21,235 to 1,008,043 on Monday. This was down from a 26,157 increase on Sunday. On Monday, 20^th April, the new number of cases had risen by 28,494.

Later in the day, U.S consumer confidence figures for April will also be in focus, though the impact will likely be limited at best.

In the futures markets, at the time of writing, the DAX was up by 62.5 points, with the Dow up by 24 points.