European Equities: Futures Point to more Doom and Gloom ahead

A greater spread of the coronavirus across new countries and a sharp rise in new cases in Italy weighed on risk appetite on Thursday.

Fears of a recession in the world’s 8^th largest economy rattled the markets, with China, Japan, Singapore, and South Korea already under the cosh.

Travel and Leisure stocks continued to bear the brunt of investor ire, though all sectors ended the day in the red.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Economic data included prelim February inflation figures out of Spain and finalized consumer confidence figures for the Eurozone.

Unsurprisingly, economic data continued to play 2^nd fiddle to the news wires and coronavirus updates.

The Eurozone’s consumer confidence indicator came in at -6.6 according to finalized numbers, which was in line with prelim. In January, the indicator had stood at -8.1.

• The pickup in consumer confidence was attributed to a brighter outlook on the economic situation. Sentiment will likely tumble in the next set of numbers.
• By contrast, the Employment Expectations Indicator eased mildly from 105.3 to 105.0.

Later in the day, U.S 4^th quarter GDP numbers and durable goods orders were in focus but also failed to influence late in the session.

Core durable goods rose by 0.9% in January, following a 0.1% rise in December. Durable goods fell by 0.2%, however, partially reversing a 2.9% jump from December.

2^nd estimate GDP numbers were in line with 1^st estimates, with even a 5.2% jump in pending home sales not enough to prevent the slide.

The Market Movers

For the DAX: autos were back into the red on Thursday. BMW and Volkswagen led the down, with the pair sliding by 3.80% and by 4.79% respectively. Continental and Daimler saw more modest losses of 2.48% and 2.69% respectively.

Things were no better for the banks, which saw heavier losses on the day. Commerzbank slid by 5.25%, with Deutsche Bank down by 5.55%.

Deutsche Lufthansa was the worst performer on the DAX for a 2^nd consecutive day, sliding by 6.48%.

From the CAC, it was another bearish day for the banks. BNP Paribas slid by 5.87%, with Credit Agricole and Soc Gen seeing heavier losses of 6.16% and by 6.44% respectively.

The auto sector also struggled, with Peugeot and Renault ending the day down by 1.89% and 6.38% respectively.

Air France-KLM slumped by 7.17% on the day.

The latest sell-off leaves the majors in corrective territory, with the EuroStoxx600 way off its all-time high from earlier in the month.

On the VIX Index

The VIX resumed its upward trend on Thursday, surging by 42.09%. Reversing a 1.04% loss from Wednesday, a 5^th day in the red out of 6 saw the VIX end the day at 39.2.

Risk aversion spread across the global financial markets, with the S&P500 sliding into corrective territory on Thursday. Coronavirus cases in the U.S and the talk of a U.S pandemic led the move into corrective territory.

We had seen the markets previously buy into the view that the U.S economy would likely be unscathed from the virus.

Commentary from the CDC and rise in the number of cases suggested otherwise, however, with the U.S economic outlook now also uncertain.

When considering the economies that have fallen at the hands of the virus and those at risk, the doom and gloom sentiment does seem justified.

For the current week, Monday through Thursday, the S&P500 was down by 10.76%.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar on Friday. Economic data includes German unemployment figures and French consumer spending and 4^th quarter GDP numbers.

Of less influence on the day include prelim inflation numbers out of Italy and Germany.

From outside of the Eurozone, U.S inflation, trade data,  personal spending, and Chicago PMI numbers will also influence late in the day.

While the stats from the Eurozone and the U.S will influence, expect coronavirus news to remain the key driver.

Bargain hunters may be looking for an entry point but with so much uncertainty, any upside would likely remain limited.

In the futures markets, at the time of writing, the DAX was down by 269.5 points, while the Dow was up by 62 points.