European Equities: Economic Data to Take a Back Seat, with Lockdown Plans in Focus

The Majors

It was a bullish end to the week for the European majors, with the CAC40 rallying by 3.42% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 3.15% and 2.63% respectively.

Support for riskier assets came from news of a new drug showing effectiveness against the coronavirus.

Adding to the upside on the day was news of governments preparing to take steps to ease lockdown measures that will likely bring an end to the economic spiral into the abyss.

Economic data took a backseat as the markets demonstrated its Teflon characteristics once more.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Friday. Finalized March inflation figures for the Eurozone were in focus.

Inflation figures failed to move the dial, however, with the markets already anticipating deflationary pressures.

Ahead of the European open, economic data out of China failed to spook the markets in spite of some quite dire numbers.

In the 1^st quarter, the Chinese economy contracted by 9.8%, quarter-on-quarter, and by 6.8% year-on-year.

While private sector PMI numbers for March had indicated a return to growth, industrial production fell by 1.1% in March. Retail sales figures were more alarming, with sales tumbling by 15.8%, year-on-year…

The stats failed to shift risk sentiment early in the day, however, with the futures markets holding on to gains made ahead of the data dump.

From the U.S, there were no material stats to influence later in the day, leaving the majors in the hands of chatter from the U.S administration.

The Market Movers

For the DAX: It was another bullish day for the auto sector on Friday. BMW and Volkswagen rallied by 6.67% and by 6.91% respectively to lead the way. Continental and Daimler and weren’t far behind, with gains of 6.28% and 5.31% respectively.

It was also a bullish day for the banks. Commerzbank and Deutsche Bank rallied by 6.31% and by 4.69% respectively.

Deutsche Lufthansa found much-needed support, with a 1.68% gain at the end of the week.

From the CAC, it was a relatively bullish day for the banks. BNP Paribas rose by 2.29%, with Credit Agricole and Soc Gen rallying by 5.39% and 3.80% respectively.

The auto sector also found support, with Peugeot and Renault rising by 3.59% and 2.37% respectively.

Air France-KLM (+2.22%) and Airbus SE (+6.77%) also rode the wave of optimism on Friday.

On the VIX Index

The VIX saw red for a 4^th day in 5 on Friday. Following on from a 1.79% decline, the VIX fell by 4.89% to end the day at 38.2.

A bullish end to the week for the Equity markets weighed on the VIX. In the U.S, the U.S equity markets rallied on news of an effective drug to combat COVID-19.

The positive news came off the back of government plans to begin easing lockdown measures across the EU and the U.S.

On Friday, the S&P500 rallied by 2.68%, with the Dow and NASDAQ gaining 2.99% and 1.38% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. German wholesale inflation figures for March and the Eurozone’s trade data for February.

Neither set of numbers is likely to have a material influence on the day.

The lack of influence will leave the markets in the hands of the latest COVID-19 numbers and chatter from EU and U.S governments.

Key in the week ahead will be more concrete details of the planned easing in lockdown measures. Following last week’s IMF forecasts, we may also hear from Brussels of plans to deliver more fiscal policy support.

The likes of the Netherlands will need to accept the need to step up and support its neighbors or face putting the EU project at risk.

Through the weekend, the number of new coronavirus cases increased by 159,257 to 2,407,294. This was an uptick from the previous weekend when the total number of new cases had risen by 155,824.

It is worth noting, however, that the uptick was not as a result of new cases in the U.S or most adversely affected EU member states.

The U.S and a combined France, Germany, Italy and Spain saw a lower number of new cases over the weekend when compared with the previous weekend.

In the futures markets, at the time of writing, the DAX was up by 121 points, while the Dow was down by 136 points.