European Equities: Geopolitical Risk and More PMIs to Test the Majors

The Majors

A run of 3 consecutive daily gains came to an end on Thursday, with the DAX30 sliding by 2.22% to lead the way down. The CAC40 and EuroStoxx600 weren’t far behind, however, with losses of 2.12% and 2.03% respectively.

Negative sentiment towards the economic outlook, following a string of dire stats on the day, left the majors in the deep red. The ECB’s decision to stand pat on monetary policy, while delivering a forecasted economic contraction of between 5% and 12% didn’t help…

It was a shortened week, with the European markets closed on Friday.

The Stats

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

Key stats included 1^st quarter GDP numbers for France, Spain, and the Eurozone and German unemployment numbers.

April prelim inflation figures and unemployment numbers for the Eurozone had a muted impact. Dire consumer spending figures out of France and Germany for March didn’t help with worse to come in April…

Looking at the GDP numbers,

France’s economy contracted by 5.8%, which was the largest contraction on records that began in the 1940s…

In Spain, the economy contracted by 5.2%, with the Eurozone’s economy contracting by 3.8% that was also the worst on record.

On the unemployment front, Germany reported a 373k increase in unemployed, leading to an unemployment rate of 5.8%. In March, the unemployment rate had stood at 5.0%. The pickup in unemployment since the spread of the coronavirus led the Eurozone’s unemployment rate from 7.3% to 7.4% in March. April’s numbers are likely to be quite dire…

On the consumption front, retail sales in Germany fell by 5.6% in March, while consumer spending slumped by 17.9% in France…

From the U.S, things were no better. Initial jobless claims jumped by another 3.839m in the week ending 24^th April. The markets had hoped for a marked decline in new claims following the surge in the previous weeks.

Personal spending figures for March slid by 7.5%.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector. Volkswagen tumbled by 4.22% to lead the way down, with Continental sliding by 3.27%. BMW and Daimler saw more modest losses of 2.70% and 1.48% respectively.

It was also a bearish day for the banks. Deutsche Bank slid by 4.07%, with Commerzbank tumbling by 7.46% on the day.

Deutsche Lufthansa also saw red, with a 2.80% fall at the end of the month.

From the CAC, the banking sector hit reverse on Thursday. Soc Gen tumbled by 8.62% to lead the way down. BNP Paribas and Credit Agricole slid by 6.60% and 5.99% respectively.

The auto sector saw deep red, with Peugeot and Renault sliding by 4.42% and by 7.62% respectively.

Air France-KLM bucked the trend on the day, with a 1.24% gain, while Airbus SE slipped by 0.87%.

On the VIX Index

It was back into the green for the VIX, which rose by 9.35% on Thursday. Reversing a 6.97% fall from Wednesday, the VIX ended the day at 34.2.

Dire economic data from the U.S and corporate earnings weighed on the U.S majors on Thursday, supporting the VIX.

Following the 1^st quarter GDP numbers on Wednesday, the weekly jobless claims figures also weighed on risk appetite.

On Thursday, the S&P500 fell by 0.92%, with the Dow and NASDAQ declining 1.17% and 0.28% respectively.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include April manufacturing PMI numbers out of Italy and Spain. Finalized April PMIs from France, Germany, and the Eurozone are also due out.

Following prelim numbers, the markets are expecting some quite dire numbers from the 2 most adversely affected member states.

Expect any downward revisions to PMIs from France, Germany, and the Eurozone to also test the majors…

From the U.S, March factory orders will likely deliver more bad news, with economists forecasting a 9.8% tumble…

While the numbers will certainly influence, expect news updates on COVID-19 and lockdown easing measures to also be in focus.

On the geopolitical risk front, the markets will also need to consider rising tensions between the U.S and China and the U.S and Iran. The last thing the global economy needs is more tariffs and sanctions on China…

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 80,636 to 3,565,119. On Saturday, the number of new cases had risen by 91,765. While down from Saturday, this was up from a 71,251 increase on the previous Sunday.

France, Germany, Italy, and Spain reported 3,938 new cases on Sunday, which was down from 6,419 new cases on Saturday. France and Germany reported just 297 and 697 news cases respectively.

From the U.S, the total number of cases rose by 27,348 to 1,188,122 on Sunday. On Saturday, the total number of cases had risen by 31,714. On Sunday, 26^th April, the total new number of cases had risen by 26,157.

In the futures markets, at the time of writing, the DAX was down by 395 points, with the Dow down by 242 points.