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Economic Calendar:

Monday, 25th May

German GDP (Q1) 2nd Estimate

German IFO Business Climate Index (May)

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Tuesday, 26th May

GfK German Consumer Climate (Jun)

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim


The Majors

It was a mixed end to the week for the European majors on Friday.

The DAX30 eked out a 0.07% gain, while the CAC40 and EuroStoxx600 slipped by 0.02% and by 0.03% respectively.

Through the early part of the day, the European majors had been in the deep red before a recovery in the late part of the session.

Rising tensions between the U.S and China and news of China’s proposal for a Security Law for HK weighed on risk appetite.

Chinese move to impose greater control over HK came as the U.S looked to ban Chinese companies from U.S exchanges. A new security law would flout agreements to allow HK to remain independent of Beijing.

Unsurprisingly, Trump responded to the move by China, stating that the U.S would react strongly to such a move.

While the rise in tension between the U.S and China was certainly negative, a late recovery transpired nonetheless.

Market sentiment towards the continued easing of lockdown measures and the downward trend in new COVID-19 cases provided support.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Friday. There were no material stats from the Eurozone or the U.S to provide the majors with direction on the day.

A lack of stats left the majors firmly in the hands of geopolitical risk on the day.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Friday. Continental rallied by 2.28% to lead the way, with BMW rising by 0.34%. Daimler and Volkswagen saw more modest gains of 0.03% and 0.14% respectively.

It was a mixed day for the banks, however. Deutsche Bank fell by 0.49%, while Commerzbank rose by 0.36%.

Deutsche Lufthansa fell by a further 2.96% following Thursday’s 3.76% slide to pin back the DAX30.

From the CAC, it was a relatively bullish day for the banking sector on Friday, following Thursday’s losses. Credit Agricole rose by 0.58% to lead the way, with BNP Paribas and Soc Gen gaining 0.32% and 0.29% respectively.

It was a mixed day for the auto sector, however, with Peugeot rising by 1.19%, while Renault slid by 2.86%.

Air France-KLM saw yet more red, with a 2.62% decline. Airbus SE ended the day down by 1.12%.

On the VIX Index

It was 3rd day in the red for the week on Friday. Partially reversing a 5.50% gain from Thursday, the VIX fell by 4.64% to end the day at 28.2.

The mixed sentiment at the end of the week left the U.S majors relatively flat on the day.

Negative sentiment towards China’s plans for an HK Security Law and rising tensions between the U.S and China pinned back the majors.

With the U.S planning to pass a bill to make it challenging for Chinese companies to list on U.S exchanges, there is plenty of uncertainty ahead.

Optimism over the continued easing of lockdown measures provided support on the day, though not enough to deliver another breakout.

On Friday, the S&P500 and NASDAQ rose by 0.24% and by 0.43% respectively, while the Dow slipped by 0.04%.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include 2nd estimate GDP numbers for the 1st quarter and May’s IFO Business Expectations figures from Germany.

Barring a marked downward revision from 1st estimate, the IFO numbers will likely have a greater influence on the day.

The markets are now looking for consumers and businesses to turn the corner from April. May’s stats will need to reflect a pickup in both consumer and business confidence to support a pickup in economic activity.

Outside of the numbers, expect any chatter from Beijing and Washington to also influence, though the U.S markets are closed for the day.

The continued downward trend in new coronavirus cases across France, Germany, Italy, and Spain is positive, however. Europe’s easing of lockdown measures is supported by the COVID-19 numbers that should deliver a pickup in economic activity.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 100,455 to 5,497,427. On Saturday, the number of new cases had risen by 99,013. The daily increase was higher than both Saturday’s rise and 83,321 new cases from the previous Sunday.

France, Germany, Italy, and Spain reported 1,470 new cases on Sunday, which was down from 1,658 new cases on Wednesday. On the previous Sunday, 2,500 new cases had been reported.

From the U.S, the total number of cases rose by 20,190 to 1,686,436 on Sunday. On Saturday, the total number of cases had risen by 21,152. On Sunday 17th May, a total of 19,891 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 84.5 points, with the Dow up by 69 points.

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