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Bob Mason

Economic Calendar:

Tuesday, 26th May

GfK German Consumer Climate (Jun)

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim


The Majors

It was a bullish start to the week for the European majors on Monday, with the DAX30 rising by 2.87% to lead the way.

The CAC40 and EuroStoxx600 weren’t far behind, with gains of 2.15% and 1.47% respectively.

Positive economic data out of Germany, a continued easing of lockdown measures, and particularly low new COVID-19 cases provided support.

The combination of fiscal stimulus, progress towards a coronavirus vaccine, and monetary policy contributed to the optimism on Monday.

Jitters over rising tensions between the U.S and China and news of China’s proposal for a Security Law for HK took a back seat on the day.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Monday. German 2nd estimate GDP figures and May’s IFO Business Climate Index were in focus early in the session.

According to Destatis,

  • The economy contracted by 1.9%, year-on-year, and by 2.2% quarter-on-quarter, which was in line with the 1st estimate.
  • This was the largest decrease since the GFC and the 2nd largest since Germany’s unification.
  • Household consumption slid by 3.2%, quarter-on-quarter.
  • Global fixed capital formation in machinery and equipment was down by as much as 6.9%.
  • Final consumption expenditure of general government (+0.2%) and gross capital fixed formation in construction (+4.1%) had a stabilizing effect.
  • Foreign trade weighed, with exports down by 3.1% from the 4th quarter, while imports increased by 0.7%.

On the business confidence front, there was some improvement, with the IFO Business Climate Index rising from 74.3 to 79.2.

According to the May IFO survey,

  • The IFO Business Climate Index rose from 74.2 to 79.5 in May, despite companies assessing their current situation as slightly worse.
  • In spite of the negative sentiment towards the current economic climate, the outlook did improve significantly.
  • While the outlook did improve due to an easing in lockdown measures, the Expectations Index remained well below pre-U.S – China trade war levels.
  • In May, the Business Expectations Index rose from 69.4 to 80.1, while the Current Assessment sub-Index slipped from 79.4 to 78.9.

Looking at the Business Climate Index:

  • The Manufacturing Business Climate Index jumped off the back of a more optimistic outlook.
  • Service sector firms saw an improvement in both outlook and sentiment to support a rise in the Business Climate Index.

From the U.S, there were no material stats with the U.S markets closed for the day.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Monday. Continental and Daimler rose by 1.64% and by 0.83% to lead the way. BMW and Volkswagen saw more modest gains of 0.12% and 0.24% respectively.

It was a bullish day for the banks, however. Deutsche Bank rallied by 2.75%, with Commerzbank gaining 0.97%.

Deutsche Lufthansa jumped by 7.92% on Monday to lead the way on the DAX. News of Lufthansa resuming flights to as many as 20 destinations by mid-June provided support. This was coupled with expectations of a government bailout that may come close to €10bn.

From the CAC, it was a relatively bullish day for the banking sector on Monday, following on from Friday’s gains. Credit Agricole rallied by 2.00% to lead the way, with BNP Paribas and Soc Gen gaining 1.87% and 0.84% respectively.

It was a bullish day for the auto sector, with Peugeot and Renault rallying by 6.20% and 4.44% respectively.

Air France-KLM also found support, rallying by 4.55%, while Airbus SE jumped by 8.51%.

On the VIX Index

The U.S markets were closed on Monday.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to Germany’s GfK Consumer Climate figures for June.

With lockdown measures easing across Germany and the EU, consumer confidence will need to see a pickup to support the majors.

Sentiment towards the job market and the outlook for hiring will be key. Hopes of a pickup in economic activity should support a more positive outlook.

From the U.S, expect U.S consumer confidence figures for May to also provide direction later in the session.

Outside of the numbers, any chatter from Beijing or Washington will also influence. The latest COVID-19 news and numbers will also need to be market positive. All of this ahead of Wednesday COVID-19 recovery fund talks.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 83,824 to 5,582,404. On Sunday, the number of new cases had risen by 101,608. The daily increase was lower than Sunday’s rise, while higher than 82,564 new cases from the previous Monday.

France, Germany, Italy, and Spain reported just 747 new cases on Monday, which was down from 1,470 new cases on Sunday. On the previous Monday, 1,916 new cases had been reported.

From the U.S, the total number of cases rose by 19,790 to 1,706,226 on Monday. On Sunday, the total number of cases had risen by 20,190. On Monday 18th May, a total of 22,231 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 9.5 points, with the Dow up by 267 points.

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