European Equities: Futures Point to another Slide as Reality Bites

Following gloomy projections from the World Bank and OPEC, the FED Chair and the FOMC economic projections delivered the markets with yet another dose of reality.

Concerns over a 2^nd wave of the coronavirus added to the negative sentiment on the day. News from newly reopened U.S states of a jump in new cases caused the stir on the day.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. French nonfarm payroll figures for the 1^st quarter failed to move the dial ahead of the European open.

In the 1^st quarter, nonfarm payrolls increased by 2.0%, following a 0.4% rise in the 4^th quarter of last year. Economists had forecast a 2.3% slide.

From the U.S

The weekly jobless claims figures drew plenty of interest, following May’s unexpected rise in nonfarm payrolls.…

In the week ending 5^th June, initial jobless claims increased by 1.542m, following a 1.877m rise in the week prior. While better than forecasts, it was still a sizeable jump.

Wholesale inflation figures for May had a muted impact, with the FED Chair’s doom and gloom having already delivered a blow to the majors.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector on Wednesday. Daimler tumbled by 10.10% to lead the way down, with Continental, and Volkswagen sliding by 8.15% and 8.17% respectively. BMW saw a relatively more modest 6.99% loss.

It was also another bearish day for the banks, with Deutsche Bank and Commerzbank sliding by 7.08% and by 7.67% respectively.

Deutsche Lufthansa was the worst performer on the day, however, tumbling by 11.66% off the back of a 5.79% fall on Wednesday.

From the CAC, it was yet another day in the deep red for the banks. Soc Gen slid by 9.37% to lead the way down. Credit Agricole and BNP Paribas saw more modest losses of 6.09% and 6.96% respectively.

Across the auto sector, it was also a bad day, with Peugeot and Renault tumbling by 10.02% and by 14.08% respectively.

Air France-KLM slid by 8.67%, while Airbus SE tumbled by 10.54%, the markets showing little interest in the French government’s rescue package.

On the VIX Index

It was back into the green for the VIC on Thursday, which surged by 47.95%. Following a flat Wednesday, the VIX ended the day at 40.79.

Market angst over the state of the economy and outlook, coupled with reports of a jump in new COVID-19 cases in the U.S did the damage.

Following May’s nonfarm payroll figures on Friday, the weekly initial jobless claims didn’t help. In the week ending 5^th June, jobless claims increased by 1.542m…

On the day, the S&P500 fell by 5.89%, with the Dow and the NASDAQ sliding by 6.90% and by 5.27% respectively.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include May’s finalized inflation figures from France and Spain and Eurozone industrial production figures for April.

We don’t expect the numbers to have any influence on the European majors, however. April was a write-off and the markets need to see May and June figures to ascertain whether the 2^nd quarter is also a write-off.

From the U.S, we will expect June’s prelim consumer economic sentiment and expectations figures to garner plenty of interest.

While nonfarm payrolls may have bounced in May, consumer sentiment and expectations will need to improve to support a more optimistic outlook on consumption.

We would expect the Floyd George riots and protests and concerns over the economic outlook to limit any upside, however. Following news of a jump in new COVID-19 cases in the U.S, we can also expect market sensitivity to the daily COVID-19 numbers to pick up near-term.

On the geopolitical front, the markets will need to monitor chatter from Capitol Hill, Beijing, and Brussels.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 136,875 to 7,582,164. On Wednesday, the number of new cases had risen by 128,469. The daily increase was higher than Wednesday’s rise and 105,318 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,091 new cases on Thursday, which was up from 510 new cases on Wednesday. On the previous Thursday, 1,009 new cases had been reported.

From the U.S, the total number of cases rose by 23,403 to 2,089,626 on Thursday. On Wednesday, the total number of cases had risen by 20,674. On Thursday, 4^th June, a total of 22,303 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 141 points, while the Dow was up by 147 points.

For a look at all of today’s economic events, check out our economic calendar.