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Bob Mason

Economic Calendar:

Thursday, 26th March

GfK German Consumer Climate (Apr)

ECB Economic Bulletin


The Majors

It was a second consecutive day in the green for the European majors, with the CAC40 rallying by 4.47% to lead the way. The EuroStoxx600 and DAX30 saw more modest gains of 3.09% and 1.79% respectively.

Wednesday delivered yet another choppy session, with the majors seeing red before finding late support.

The upside came in spite of the continued spread of the coronavirus and the ever-increasing number of countries going into full lockdown.

Hopes of a smooth passing of the U.S Stimulus Bill provided support, following news that the U.S administration had struck a deal.

The Stats

It was a quieter day on the Eurozone economic calendar on Wednesday. German IFO index numbers for March were in focus along with French jobseeker numbers.

In March, Germany’s IFO Business Climate Index tumbled from 96.0 to 86.1. Economists had forecast fall to 87.7.

According to the IFO’s March report,

  • The Business Expectations sub-index fell from 93.1 to 79.7, with the Current Assessment sub-index falling from 99.0 to 93.0.
    • In manufacturing, the index fell to its lowest level since Aug-09, weighed by the largest slide in the manufacturing expectations sub-index in the survey’s 70-year history.
    • Looking at the current situation sub-index, the decline was less pronounced, though still declined across all industries.
    • In the service sector, the business climate index saw its largest slide in survey history.
    • This was also the case for the assessment of the current situation and expectations sub-indexes.
    • In trade, the business climate indicator slumped. Expectations slid to the lowest level since German reunification. Companies also cut their assessment of the current situation.
    • Only food retailers and drugstores were positive exceptions.

From the U.S

February durable goods orders had a muted impact, with the spread of the coronavirus and both fiscal and monetary policy support coming a month later…

The Market Movers

For the DAX: It was a mixed day for the auto sector. Daimler rallied by 3.51%, off the back of Tuesday’s 23.82% surge, to lead the way. BMW and Volkswagen also found further support, rising by 2.88% and 2.25% respectively. Continental bucked the trend on the day, falling by 0.06%.

It was another bullish day for the banks, however, with Commerzbank and Deutsche Bank rising by 5.43% and by 3.22% respectively.

Deutsche Lufthansa fell by 1.48% on the day, partially reversing an 11.44% rally from Tuesday.

From the CAC, it was also a bullish day for the banks. Soc Gen led the way once more with an 11.44% gain, with BNP Paribas and Credit Agricole rising by 5.47% and 7.99% respectively.

The auto sector also found further support, with Peugeot and Renault rising by 2.76% and 1.91% respectively.

Air France-KLM rose by 4.29%, with the upside coming in spite of air travel coming to a standstill for an unknown period of time. Airbus SE made an even stronger gain of 7.2% on the day…

On the VIX Index

The VIX rose by 3.7% on Wednesday to see green for a 2nd consecutive day. Following a 0.13% gain on Tuesday, the VIX ended the day at 64.0.

Once more we saw the VIX make gains alongside the U.S equity markets, suggesting that some may not be fully convinced in the movements.

When considering the continued spread of the coronavirus and lockdown across the globe it isn’t wholly surprising.

On the day, the S&P500 rose by 1.15%, with the gains coming in spite of the Stimulus Bill yet to have been voted through.

VIX 26/03/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Germany’s April GfK Consumer Climate figures are due out along with the ECB’s Economic Bulletin.

The markets are not expecting anything positive from the consumer climate figures, leaving the majors in the hands of the ECB Economic Bulletin.

It will be the first real economic assessment since the ECB’s rollout of the PEPP. Following the March prelim private sector PMIs, the Bulletin will certainly garner more attention than usual.

From the U.S, expect the weekly jobless claims figures to send shockwaves through the global financial markets… There is also the Stimulus Bill to consider. At the time of writing, the Bill had yet to be passed through…

In relation to the coronavirus, the markets will need to see further evidence that the spread is slowing in Italy and Germany, in particular…

In the futures markets, at the time of writing, the DAX was up by 24.5 points, with the Dow up by 265 points.

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