European Equities: GDP and Retail Sales Figures and Corporate Earnings in Focus

The Majors

It was back into the red on Thursday, as the global equity markets responded to the spread of the coronavirus that flattened the U.S Treasury 3-month to 10-year yield spread.

The CAC40 and DAX30 led the way down, sliding by 1.40% and 1.41% respectively, with the EuroStoxx600 ending the day with a 1.01% loss.

Economic data and earnings took a back seat on Thursday. Jitters over the coronavirus returned, with even FED Chair Powell concerned over possible economic disruption over the spread of the virus.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Thursday.

Key stats included German and Eurozone unemployment numbers and prelim January inflation figures out of Germany.

Germany’s unemployment rate held steady in January, with the number of unemployed falling by 2k. Economists had forecast a 5k increase, following an 8k rise in December.

The better than anticipated numbers supported a fall in the Eurozone’s unemployment rate from 7.5% to 7.4%, the lowest since May 2018.

According to Eurostat,

• Member states with the lowest unemployment rates were Germany and the Netherlands, both at 3.2%.
• The largest decrease in the unemployment rate was recorded in Greece over the last 12-months (18.5% to 16.6%).
• Greece had the highest unemployment rate at 16.6%, with Spain a distant 2^nd at 13.7%.

On the inflation front, German consumer prices fell by 0.6% in January, which was in line with forecasts. In December, consumer prices had risen by 0.5%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Volkswagen led the way down, sliding by 2.85%, with BMW (-0.77%) and Daimler (-0.92%) also seeing red. Continental bucked the trend, gaining 0.68%.

It was also a mixed day for the banks. Commerzbank fell by 0.59%, while Deutsche Bank rallied by 5.61% on the day.

The gains for Deutsche Bank came off the back of its earnings results. The bank announced a full-year net loss of €5.3bn, which was attributed entirely to the ongoing restructuring of the bank. Increased revenue in its investment bank unit was positive, however.

Deutsche Lufthansa returned to negative territory, with a 0.18% fall. Elsewhere, Wirecard and Infineon Technologies saw more red, with losses of 0.11% and 2.42% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.07%, with Credit Agricole and Soc Gen down by 1.44% and 1.04% respectively.

It was a mixed day for the French auto sector, however, with Peugeot falling by 0.03%, while Renault rose by 0.07%

Air France-KLM closed out the day relatively flat, with a 0.02% loss.

On the VIX Index

It was back into the red for the VIX on Thursday. Reversing a 0.68% gain from Wednesday, the VIX fell by 5.49% to end the day at 15.5.

U.S equities had been under pressure through the day before the World Health Organization declared the coronavirus outbreak a global health emergency.

The declaration eased pressure on the markets, with the WHO also noting that the Chinese government was in control of the situation.

Greater international cooperation over containing the virus is the likely positive outcome.

U.S equities rebounded to close out the day in positive territory leading to the slide in the VIX.

The Day Ahead

It’s a particularly busy day on the Eurozone economic calendar, with German and French retail sales figures due out. 4^th quarter GDP numbers out of France and the Eurozone will also provide direction.

We would expect Spain’s 4^th quarter GDP numbers and inflation figures out member states and the Eurozone to have a muted impact.

From the U.S, inflation and Chicago PMI figures will also influence late in the day.

Outside of the numbers, however, updates on the coronavirus will likely have the greatest influence on the day. The U.S equity markets bounced back late in the U.S session, following the WHO’s declarations. Expect the European majors to follow suit ahead of the day’s data.

In the futures markets, at the time of writing, the DAX was up by 71 points, while the Dow down by 7 points.