European Equities: COVID-19, April PMIs and the EU Summit in Focus

The comments came in response to a reported 11 Iranian gunboats coming close to U.S ships in the Gulf.

News of plans to further ease lockdown measures coupled with further stimulus plans added to the upside.

Italy is expected to now join Germany in easing lockdown measures, with the easing process expected to start on 4^th May. On the policy front, hopes of further stimulus ahead of Thursday’s EU Summit added to the upside.

The upside on the day was limited, however, as companies delivered some alarming earnings forecasts to test risk appetite.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Wednesday, with key stats limited to Eurozone consumer confidence figures.

The Eurozone’s consumer confidence indicator fell from -11.6 to -22.7 in April, according to prelim figures. Economists had forecasted a slide to -19.6. The Indicator stood well below the long-term average of -11.1 and sat close to the record low recorded during the Great Recession…

From the U.S, there were no material stats to influence, leaving the impasse on crude oil prices and Capitol Hill in focus.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Wednesday. Continental and Volkswagen rose by 1.05% and by 1.89% respectively to lead the way. BMW and Daimler saw more modest gains of 0.71% and 0.14% respectively.

It was also a bullish day for the banks, with Commerzbank and Deutsche Bank rising by 1.81% and by 0.71% respectively.

Deutsche Lufthansa fell by 1.59%, following Tuesday’s 3.59% slide, to buck the trend on the day.

From the CAC, the banking sector found much-needed support on Wednesday. BNP Paribas and Credit Agricole rose by 3.51% and by 3.52% respectively, with Soc Gen gaining 2.67%.

The auto sector had yet another mixed day, however. Peugeot rallied by 5.86, while Renault fell by 3.07%.

Air France-KLM fell by 0.60%, while Airbus SE rose by 3.02%.

On the VIX Index

It was back into the red for the VIX that had enjoyed a rare 2-day run in the green. Reversing a 3.60% gain on Tuesday, the VIX slid by 7.55% on Wednesday to end the day at 42.0.

A pickup in crude oil prices and the Senate’s approval of a fresh coronavirus aid package delivered support to the U.S equity markets.

There were no major stats from the U.S to rock the boat on the day.

Talks of easing lockdown measures across a number of U.S states added to the demand for riskier assets on the day.

The S&P500 rose by 2.29%, with the Dow and NASDAQ ending the day with gains of 1.99% and 2.81% respectively.

The Day Ahead

It’s a particularly busy day ahead on the Eurozone economic calendar. Germany’s GfK Consumer Climate figures for May get things going.

We saw the index tumble from 9.8 to 2.7 in April, with further declines likely. As Germany begins to ease lockdown measures, however, the numbers should have a muted impact on the majors.

Of greater interest are April’s prelim PMI numbers for France, Germany, and the Eurozone. While further downside is anticipated, particularly dire numbers would test market resilience.

From the U.S, the weekly jobless claims figures and prelim private sector PMIs for April will also influence.

After a string of sizeable jumps in the weekly initial jobless claims, the markets will be looking for lower numbers.

For the private sector, however, the more stringent containment measures in April will likely deliver some quite dire U.S PMI numbers.

It will boil down to how badly the private sector contracted in April. Expect the Services PMI to have the greatest impact.

From the real estate sector, new home sales figures for March will also be of interest, though April and May will be of more interest…

Away from the economic calendar, COVID-19 updates and crude oil prices will also be in focus. Brussels will also need monitoring, with any chatter on a larger bail-out package likely to provide support. Hopes of further stimulus contributed to the upside on Wednesday. A failure for the Summit to deliver later today will likely send the majors into reverse.

Coronavirus Numbers

On Wednesday, the number of new coronavirus cases rose by 78,442 to 2,634,918. This was up marginally from a 75,450 increase on Tuesday.

France, Germany, Italy, and Spain reported 11,603 new cases on Wednesday, which was up from 10,752 new cases on Tuesday. The numbers continued to support the downward trend seen from last week, however.

From the U.S, the total number of cases rose by 29,760 to 848,504. On Tuesday, the total number of cases had risen by 25,985. On Wednesday of last week, the total number of new cases had risen by 30,462…

In the futures markets, at the time of writing, the DAX was down by 6.5 points, with the Dow down by 86 points.