European Equities: Futures Point to a Tough Day Ahead for the Bulls

The Majors

It was a bearish day for the European majors on Friday, with the DAX30 sliding by 0.62% to lead the way down. The CAC40 and EuroStoxx600 saw more modest losses of 0.54% and 0.49% respectively.

Risk aversion stemming from a marked increase in the number of new coronavirus cases sent the majors in the red.

While numbers out of China continued to reflect a slowing in the number of new cases and deaths, it was South Korea that spooked the markets.

With the number of new cases and deaths spiking, there were also likely doubts over the accuracy of the numbers out of China.

The downside was relatively minor, however, with better than anticipated private sector PMI numbers for February limiting the damage.

The Stats

It was a busy day on the Eurozone economic calendar on Friday. Economic data included private sector PMI numbers out of France, Germany, and the Eurozone.

According to the prelim numbers:

The French Manufacturing PMI fell from 51.1 to 49.7, while the services PMI jumped from 51.0 to 52.6.

It was also mixed out of Germany, with the manufacturing PMI rising from 45.3 to 47.8, while the services PMI fell from 54.2 to 53.3.

For the Eurozone, the Manufacturing PMI rose from 47.9 to 49.1, with the Services PMI rising from 52.5 to 52.8.

The Eurozone’s Composite PMI increased from 51.3 to 51.6.

According to the Eurozone PMI survey,

• The Eurozone’s Composite Output Index hit a 6-month high, with the Manufacturing Output Index hitting an 8-month high.
• Supported by better numbers out of France and Germany, the Manufacturing PMI hit a 12-month high in February.
• In spite of the rise in the Manufacturing PMI, new orders fell for a 17^th consecutive month. The decline was the smallest in 15-months, however. Domestic demand offset much of a more marked decline in demand from overseas.
• Overall, however, new orders increased at a rate equal to January’s 7-month high.

From the U.S, PMI numbers were particularly disappointing, however, adding to the doom and gloom that ultimately led to a bounce-back in the EUR.

The Market Movers

For the DAX: it was a bearish day for the auto sector on Friday. Daimler led the way sliding by 3.03%, with Volkswagen down by 2.46%. BMW and Continental saw more modest losses of 1.51% and 1.38% respectively.

It was also a bearish day for the banks. Commerzbank fell by 3.41%, with Deutsche Bank down by 4.46%.

Deutsche Lufthansa also saw red, falling by 1.86%, as the markets continued to digest Air France-KLM’s earnings results and forward guidance.

From the CAC, it was a relatively bearish day for the banks. BNP Paribas and Credit Agricole both fell by 0.08%, with Soc Gen falling by 0.48%.

The auto sector also struggled at the end of the week. Renault slid by 3.00%, with Peugeot ending the day down by 1.49%.

Air France-KLM took another hit on Friday, sliding by 3.30%, the loss coming off the back of a 3.49% tumble on Thursday.

On the VIX Index

The VIX rose by 9.77% on Friday. Following on from an 8.21% gain on Thursday, the VIX ended the day at 17.1.

Bearish sentiment through the European and U.S sessions delivered the upside on Friday as the markets digested the latest coronavirus updates.

Disappointing private sector PMI numbers out of the U.S added to the negative sentiment at the end of the week.

The S&P500 fell by 1.05% on the day, following from a pullback on Thursday that had reversed gains from earlier on the week.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar on Monday. Economic data includes German IFO Business Climate index numbers for February.

Forecasts are negative for the majors, with the IFO Business Climate Index forecasted to fall from 95.9 to 95.1.

While we can expect influence from the numbers, updates from China and beyond on the coronavirus will remain the key driver near-term.

In the futures markets, at the time of writing, the DAX was down by 235.5 points, with the Dow down by 408 points.