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Bob Mason

Economic Calendar:

Tuesday, 7th April

German Industrial Production (MoM) (Feb)

Thursday, 9th April

German Trade Balance (Feb)

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The Majors

It was a bullish start to the week for the European majors on Monday, with the DAX30 rallying by 5.77% to lead the way. The CAC40 and EuroStoxx600 also found strong support, rising by 4.61% and by 3.73% respectively.

Economic data took a back seat on Monday, with February figures of little interest for the markets.

Sunday’s coronavirus numbers delivered the upside on the day. The total number of cases amongst the worst affected EU countries saw a marked fall on Sunday.

Across France, Germany, Italy, and Spain, the number of new cases rose by 16,711 to 453,556 on Sunday. On Saturday, the total number of cases had risen by a whopping 42,323 to 436,845.

These were significant numbers, particularly for Spain, which reported a rise of just 2,780 on Sunday, following 6,969 new cases on Saturday. Over the weekend, Spain had stated that the spread of the virus may have peaked.

From the U.S, the numbers also showed an improvement, with the number of new cases rising by 24,774 on Sunday to 336,131. On Saturday, 34,196 new cases had been reported.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Key stats were limited to Germany’s factory order numbers for February that had a muted impact on the majors.

Factory orders fell by 1.4% in February, following a downwardly revised 4.8% jump in January. Economists had forecast a 2.4% decline.

According to Destatis,

  • Domestic orders increased by 1.7%, while foreign orders slid by 3.6%, month-on-month.
  • New orders from within the Euro area slumped by 5.0%, with new orders from other countries falling by 2.7%.
  • New orders for intermediate goods increased by 0.9%, while new orders for the manufacture of capital goods slid by 3.4%. Consumer goods saw a 1.7% increase in new orders.
  • Destatis noted that the coronavirus pandemic had yet to have a notable impact on new orders in Germany.

There were no stats from the U.S to provide direction later in the session.

The Market Movers

For the DAX: It was a particularly bullish start to the week for the auto sector. Continental and Volkswagen led the way rallying by 12.95% and 13.96% respectively. BMW and Daimler weren’t far behind, with gains of 10.22% and 11.29% respectively.

It was also a bullish day for the banks, with Commerzbank and Deutsche Bank rallying by 7.67% and by 8.07% respectively.

Deutsche Lufthansa found much-needed support, with an 8.66% gain.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 3.68% and 3.76% respectively, with Soc Gen rallying by 9.16%.

The auto sector was also on the move on Monday. Peugeot rose by 8.97%, with Renault rallying by 14.17%.

Air France-KLM and Airbus SE found strong support, with the pair gaining 2.94% and 8.13% respectively.

On the VIX Index

The VIX saw red for a 3rd consecutive day on Monday, falling by 3.33%. Following on from an 8.07% decline on Friday, the VIX ended the day at 45.2.

A bullish start to the week for the equity markets saw the VIX hit reverse, as the U.S equity markets responded to the coronavirus numbers from Sunday.

The latest figures revealed a lower number of new cases, which drove demand for riskier assets at the start of the week.

Across the U.S equity markets, the S&P500 rose by 7.03%, with the Dow and NASDAQ each closing out the day with 7.33% gains.

The Day Ahead

It’s another relatively quiet day ahead on the Eurozone economic calendar. German industrial production figures for February are due out ahead of the European open.

Once more, we expect the markets to brush aside the numbers. A marked slowdown in private sector activity in March that will likely continue through April will leave February numbers with little to no influence.

From the U.S, February’s JOLTs job openings will also be brushed aside, with the labor market figures in late March and early April more relevant and reflective of the effects of COVID-19 on the U.S economy.

With the stats likely to have little to no impact, the market attention will remain on the coronavirus numbers.

There will need to be a continued downtrend in new cases to support a sustained recovery. The majors do remain susceptible to another spike in cases.

On Monday, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 17,050 to 470,606. In the U.S, the total number of cases increased by 28,127 to 364,258. That took the total number of cases globally to 1,342,775.

While there a higher number of cases on Monday, when compared with Sunday, the numbers were still well below Saturday numbers. Of greatest significance on the day were the numbers from Italy, with new cases rising by just 901.

In the futures markets, at the time of writing, the DAX was up by 158.5 points, with the Dow up by 91 points.

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