European Equities: Geopolitics and COVID-19 in Focus, with no Major Stats to Rock the Boat

The Majors

It was a bullish end to the week for the European majors, with the DAX30 rallying by 1.35% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 1.07% and 0.91% respectively.

Economic data had a limited impact on the day, in spite of some quite dire numbers from the Eurozone and the U.S.

Updates from Beijing and Washington on trade talks and the phase 1 trade agreement supported the majors on the day.

Plans to continue easing lockdown measures and corporate earnings also played supporting roles on the day.

The Stats

It was a quiet day on the Eurozone economic calendar on Friday. Key stats were limited German trade data for March that barely moved the dial.

Germany’s trade surplus narrowed from €21.6bn to €12.8bn in March. Economists had forecast a surplus of €17.5bn.

According to Destatis,

• Exports slid by 11.8% from the previous month and by 7.9% from the same month a year earlier. This was the largest monthly decline in exports since records began back in 1990.
• Imports fell by 5.1% from the previous month and by 4.5% from the same month a year earlier. This was the largest monthly decline since 2009.
  • Germany exported goods to the value of €55.6bn to EU member states, while importing €48.7bn.
  • Compared with March 2019, exports to EU countries fell by 11.0%, while imports fell by 8.0%.
  • Germany exported goods to the value of €38.3bn (-14%) to Euro area countries, while importing goods to the value of €34.0bn (-7.8%).
  • To EU countries not belonging to the Euro area, Germany exported goods to the value of €17.3bn (-3.8%), while importing €14.8bn (-8.6%) worth of goods.
  • Compared with March 2019, exports to countries outside of the EU fell by 4.3%, while imports fell by 0.1%.

From the U.S, April nonfarm payroll and unemployment figures failed to spook the markets, with economists having forecasted more dire numbers.

Nonfarm payrolls slumped by a post-war record of 20.5m in April, leading to an unemployment rate of 14.7%. Economists had, however, forecasted a fall of 22m in nonfarm payrolls and an unemployment rate of 16.0%.

Hopes were that this is as bad as it gets, which limited the damage. The markets had expected far worst on Friday.

The Market Movers

For the DAX: It was a bullish end to the week for the auto sector. Continental and Daimler rallied by 5.87% and 4.82% respectively to lead the way. BMW wasn’t far behind, gaining 3.42%, while Volkswagen trailed with a more modest 1.93% rise.

It was a mixed day for the banks. Deutsche Bank rose by 1.61%, while Commerzbank slipped by 0.09%.

Deutsche Lufthansa eked out a 0.62% gain on the day.

From the CAC, the banking sector also found support following on from Thursday’s gain. BNP Paribas rose by 1.12%, with Credit Agricole and Soc Gen seeing gains of 1.14% and 1.55% respectively.

It was a bullish day for the auto sector. Peugeot and Renault rallied by 3.75% and by 2.54% respectively.

Air France-KLM managed to bounce back from Thursday’s 2.52% slide, with a 2.83% gain. Airbus SE avoided the red once more, rising by 0.57% on the day.

On the VIX Index

It was a 2^nd consecutive day in the red for the VIX, which fell by 11.01% on Friday. Following on from a 7.85% decline on Thursday, the VIX ended the day at 28.0.

U.S nonfarm payroll and unemployment figures were better than forecasted, providing support to the U.S equity markets.

The general consensus from the numbers was that it was the bottom and that should be the end of the slide in payrolls.

A continued easing of lockdown measures coupled with trade talks between the U.S and China added to the upside on the day.

The S&P500 rose by 1.69%, with the Dow and NASDAQ rallying by 1.91% and by 1.58% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the European majors with direction.

With a lack of stats from the U.S later in the day, the majors will be in the hands of market risk sentiment on the day.

Key drivers include updates from any further U.S – China discussions from the weekend and chatter from Brussels on fiscal support.

In spite of a spike in the number of new cases on Thursday of last week, the trend in COVID-19 numbers continued to support the easing of lockdown measures across the EU and the U.S…

A combination of the three would support a 3^rd consecutive day in the green.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 78,198 to 4,179,839. On Saturday, the number of new cases had risen by 100,666. The daily increase was far lower than Saturday’s rise and lower than an 80,636 increase on the previous Sunday.

France, Germany, Italy, and Spain reported just 3,549 new cases on Sunday, which was down from 5,163 new cases on Saturday. On the previous Sunday, 3,938 new cases had been reported.

From the U.S, the total number of cases rose by 20,329 to 1,367,638 on Sunday. On Saturday, the total number of cases had risen by 28,805. On Sunday, 3^rd May, the total new number of cases had risen by 27,348.

In the futures markets, at the time of writing, the DAX was up by 80.5 points, with the Dow up by 126 points.