European Equities: Geopolitics, COVID-19 and German Business Sentiment in FocusFresh COVID-19 spikes in the U.S, mixed signals from the U.S administration and German business sentiment to keep the majors busy.
Wednesday, 24th June
German Business Expectations (Jun)
German Current Assessment (Jun)
German IFO Business Climate Index (Jun)
Thursday, 25th June
GfK German Consumer Climate (Jul)
It was a particularly bullish day for the European majors on Tuesday, with economic data supporting a reversal of Monday’s losses, with interest.
The DAX30 led the way, rallying by 2.13%, with the CAC40 and EuroStoxx600 gaining 1.39% and 1.30% respectively.
On the day, COVID-19 numbers at the start of the week revealed a pullback in new cases from last week’s spike. While the numbers were lower, news of new spikes in the U.S and Germany reintroducing lockdown measures in one district remained a concern.
Economic data provided much-needed support, however, with prelim June PMIs from the Eurozone and the U.S beating expectations.
The upside came in spite of news hitting the wires in the early hours of the U.S administration announcing that the U.S – China trade agreement was “Over”.
White House adviser Navarro had announced that the trade agreement was over. He cited Beijing’s failure to give the U.S an early warning of the COVID-19 spread as the reason to break ties.
As we have seen on previous occasions, Navarro then clarified that the U.S China deal is not over… Perhaps the administration had been alarmed by the market reaction and decided to send yet more contradictory messages to confuse all…
It was a busy day on the Eurozone economic calendar on Tuesday. June’s prelim private sector PMIs figures for France, Germany, and the Eurozone were in focus early in the European session.
France’s Manufacturing PMI increased from 40.6 to 52.1, with the Services PMI rising from 31.1to 50.3. Economists had forecast a Manufacturing PMI of 46.0 and Services PMI of 44.2.
Germany’s manufacturing PMI rose from 36.6 to 44.6, with the Services PMI increasing from 32.6 to 45.8. Economists had forecast a Manufacturing PMI of 44.6 and Services PMI of 45.8.
For the Eurozone, the Manufacturing PMI rose from 39.4 to 46.9, with the Services PMI increasing from 30.5 to 47.3.
The Eurozone’s Composite PMI came in at 47.5, which was up from a May 31.9 and ahead of a forecasted 42.4.
According to the prelim June survey:
- The Composite Output Index rose by a series record high 15.6 points to a 4-month high 47.5.
- Both the service and manufacturing PMIs hit 4-month highs in June, according to prelim figures.
- New business fell for a 4th consecutive month, leading to a further slide in backlogs of orders.
- Sentiment hit the highest level since February, however, supported by the easing in lockdown measures.
- Job cuts continued into June. While the rate of job shedding eased, factory headcounts continued to be cut at a marked pace.
- By region, France led the recovery, with output returning to growth for the 1st time since February, driven by manufacturing.
From the U.S
The manufacturing PMI rose from 39.8 to 49.6, with the services PMI increasing from 37.5 to 46.7. A lesser contraction across the private sector led to a rise in the Composite PMI from 37.0 to 46.8.
Aligned with the Eurozone, the private sector PMIs saw 4-month highs in June.
According to the prelim June survey:
The private sector continued to cut workforce numbers, albeit at a modest rate, with hiring freezes and cost-cutting measures in place.
New business declined further in June. While some firms noted a rebound in client demand, some stated that renewals and requests were historically muted. In spite of the negative views, the rate of contraction slowed, with the manufacturing sector seeing only a fractional decline.
The Market Movers
For the DAX: It was a particularly bullish day for the auto sector on Tuesday. Volkswagen rallied by 3.69% to lead the way, with BMW rising 0.71%. Continental and Daimler trailed, however, with gains of 0.18% and 0.27% respectively.
It was also a bullish day for the banks, with Deutsche Bank and Commerzbank rallying by 2.05% and 4.36% respectively.
Recently departed Deutsche Lufthansa saw a 2nd consecutive day in the red, falling by 3.80% following a 3.17% loss on Monday.
The story of the day once more, however, was WIRECARD AG, which surged by 34.99%. It’s way off levels seen before last week’s meltdown but it was up nonetheless…
From the CAC, it was a bullish day for the banks on Tuesday. Soc Gen led the way, rallying by 4.39%. BNP Paribas and Credit Agricole saw solid gains of 3.45% and 3.93% respectively.
The French auto sector found support, with Peugeot and Renault rallying by 7.48% and 6.40% respectively.
Air France-KLM followed on from a 4.52% slide on Monday with 1.79% loss, with Airbus SE declining by 0.74%.
On the VIX Index
It was a 2nd consecutive day in the red for the VIX on Tuesday. Following a 9.54% slide from Monday, the VIX fell by 1.26% to end the day at 31.37.
It was a bullish day for the U.S major indexes, with the NASDAQ hitting a fresh record high on Tuesday.
Better than expected prelim private sector PMIs for June delivered strong support on the day. While FED Chair Powell had talked of a long road back to growth, the PMIs suggested otherwise…
Concerns over a rise in new COVID-19 cases in a number of U.S member states limited any upside, however.
Following the Governor of Texas’s comments on Monday, California reported its largest one day spike in new cases on Tuesday.
The S&P500 and Dow rose by 0.43% and by 0.50% respectively, with the NASDAQ gaining 0.74%.
The Day Ahead
It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include Germany’s IFO Business Climate and sub-index figures for June.
Following Tuesday’s better than expected PMI numbers, Germany’s business sentiment will need to back up the PMIs. Weak figures will test the major after Tuesday’s breakout, with the headline and economic sentiment figure key on the day.
From the U.S
There are no material stats due out of the U.S to influence, which will leave geopolitics and COVID-19 in focus later in the day.
The Latest Coronavirus Figures
On Tuesday, the number of new coronavirus cases rose by 158,646 to 9,329,404. On Monday, the number of new cases had risen by 126,214. The daily increase was higher than Monday’s rise and up from 156,317 new cases from the previous Tuesday.
Germany, Italy, and Spain reported 952 new cases on Tuesday, which was equal to 952 new cases on Monday. On the previous Tuesday, just 767 new cases had been reported.
From the U.S, the total number of cases rose by 34,399 to 2,420,920 on Tuesday. On Monday, the total number of cases had risen by 29,864. On Tuesday, 16th June, a total of 26,844 new cases had been reported.
In the futures markets, at the time of writing, the DAX was down by 55 points, while the Dow was up by 64 points.
For a look at all of today’s economic events, check out our economic calendar.