European Equities: COVID-19 Figures and Easing Lockdown Measures Provide Support Ahead of the Open

The Majors

It was a bearish start to the week for the European majors, with the CAC40 sliding by 4.24% to lead the way down.

The DAX300 and EuroStoxx600 weren’t far behind, with the pair falling by 3.64% and 2.65% respectively.

A 2^nd consecutive day in the red came as the markets responded to chatter from Beijing and Washington from the weekend.

Trump and the U.S administration has accused Beijing of the coronavirus pandemic, bringing forward Trump’s goal to end China’s control over the global supply chain.

The threat of fresh tariffs, sanctions, or both weighed on market risk appetite at the start of the week.

For a U.S President seeing his lead evaporate as a result of the COVID-19 pandemic, the move makes perfect sense. Diverting attention away from the U.S government’s failings in such an aggressive manner may just work.

The global economy may have wished for the focus to remain on restoring the supply chain to prevent a lengthier economic meltdown, however.

The Stats

It was a busy day on the Eurozone economic calendar on Monday.

Key stats included April manufacturing PMI numbers from Italy and Spain. Finalized manufacturing PMIs from France, Germany, and the Eurozone were also in focus.

There was nothing in the numbers, however, to limit the downside for the European majors on the day.

Spain’s manufacturing PMI slid from 45.7 to 30.8, with Italy’s manufacturing PMI falling from 40.3 to 31.1.

France’s finalized manufacturing PMI came in at 31.5, which was in line with prelim but down from 43.2 in March.

Germany’s finalized manufacturing PMI came in at 34.5, which was up from a prelim 34.4. In March, the PMI had stood at 45.4.

The Eurozone’s finalized April Manufacturing PMI came in at a record low 33.4, which was revised down from 33.6. In March, the PMI had stood at 44.5.

According to the Markit Survey,

• Output, new orders, export sales, and purchasing activity all fell at record rates.
• Supply-side constraints continued to intensify, while confidence about the future sank to a fresh series low.
• At the country level, Greece recorded a record low 29.5 to sit in the last place, with Spain’s 136-month low 30.8 leaving it just above Greece.
• The Netherlands topped the table with a 131-month low 41.3.
• Ireland and Germany came in 2^nd and 3^rd, both with 133-month lows.
• Austria, France, and Italy took the middle spots with record lows.

From the U.S, things were no better. Factory orders tumbled by 10.3% in March, which was worse than a forecasted 9.7% slide.

The Market Movers

For the DAX: It was another bearish day for the auto sector. Daimler and Volkswagen tumbled by 5.22% and by 4.09% to lead the way down. BMW and Continental saw more modest losses of 3.15% and 3.75% respectively.

It was also another bearish day for the banks. Deutsche Bank and Commerzbank slid by 4.41 and 4.95% respectively.

Deutsche Lufthansa saw a more modest 0.73% decline, following a 2.80% fall on Thursday.

From the CAC, the banking sector continued to slide on Monday. Soc Gen tumbled by 7.78% to lead the way down, with BNP Paribas and Credit Agricole sliding by 5.46% and 4.24% respectively.

The auto sector also continued to struggle, with Peugeot and Renault falling by 3.86% and by 5.71% respectively.

Air France-KLM tumbled by 7.49%, with Airbus SE ending the day with a 4.98% loss.

On the VIX Index

It was back into the red for the VIX, which fell by 3.28% on Monday. Partially reversing an 8.90% gain from Friday, the VIX ended the day at 36.0.

A bounce back from heavy losses from the start of the day delivered minor gains for the U.S equity markets, which left the VIX in the red. Earlier in the day, the VIX had hit an intraday high 40.3 before hitting reverse.

Rising crude oil prices and a tech stock rally delivered the upside for the U.S equity markets.

On Monday, the S&P500 rose by 0.42%, with the Dow and NASDAQ gaining 0.11% and 1.23% respectively. The S&P500 had been down by as much as 1.16% before the late recovery.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to Spanish unemployment figures.

Expect the markets to react to any jump in unemployment by the levels seen from the previous month, when unemployment had surged by 302.3k.

From the U.S, the markets’ preferred ISM Non-Manufacturing PMI for April will garner plenty of attention.

The markets are expecting the headline figure to avoid sub-30. Anything worse and expect riskier assets to come under pressure.

On the geopolitical risk front, the markets will also need to consider rising tensions between the U.S and China and the U.S and Iran.

For the EU, the downward trend in the new number of new coronavirus cases continued to support the lockdown in easing measures. The easing in lockdown measures remains market positive for the European majors.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 74,217 to 3,639,336. On Sunday, the number of new cases had risen by 80,636. While down from Sunday, this was up marginally from a 66,953 increase on the previous Monday.

France, Germany, Italy, and Spain reported 3,642 new cases on Monday, which was down from 3,938 new cases on Sunday. France and Germany reported just 769 and 473 news cases respectively.

From the U.S, the total number of cases rose by 22,145 to 1,210,267 on Monday. On Sunday, the total number of cases had risen by 27,348. On Monday, 27^th April, the total new number of cases had risen by 23,699.

In the futures markets, at the time of writing, the DAX was up by 141.5 points, with the Dow down up 144 points.