European Equities: German Business Sentiment and COVID-19 News in Focus

Consumer Sentiment

For April, the GfK Consumer Climate Index increased from a revised -12.7 to -6.2. Economists had forecast an increase to -11.9.

According to the GFK survey,

• The easing of hard lockdown, which started in early March, as well as a downward trend in infection rates supported consumer confidence.
• In terms of timing, the survey was conducted between 4^th and 15^th March, before Germany’s initial announcement of fresh lockdown measures.
• A sharp increase in new COVID-19 cases and issues surrounding the AstraZeneca vaccine had a muted impact on sentiment.

Looking at the individual components of the survey,

• Income expectations hit a 12-month high, with the indicator jumping by 15.8 points to 22.3 points.
• Propensity to buy followed rising income expectations, with the indicator rising by 4.9 points to 12.3 points. This remains 19 points below the previous year’s level.
• The economic expectations indicator rose by 9.7 points to 17.7, its highest level since September 2020.

Later in the session, the ECB Economic Bulletin also drew interest.

The ECB Economic Bulletin

Salient points from the ECB Economic Bulletin included:

• While the overall economic situation is expected to improve over 2021, uncertainties near-term remain.
• Persistently high infection rates, the spread of the virus mutations, and the associated and tightening of containment measures are weighing on euro area economic activity in the short term.
• Looking ahead, the ongoing vaccination campaigns, together with the envisaged gradual relaxation of containment measures, underpin the expectation of a firm rebound in economic activity this year.
• Other areas of focus include inflation and trade, both of which were favorable for riskier assets.
• While the ECB saw a pickup in near-term inflationary pressures, the longer-term outlook was for a softening early next year.
• Trade terms were viewed as positive, supported by a marked pickup in manufacturing sector activity in Q42020.
• The Euro area labor market continues to benefit from significant policy support.
• Consumer spending lost momentum around the turn of the year. While household savings have been on the rise, households’ expectations for the next 12-months vis-à-vis the general economic situation, their personal financial situation, and their plans to make major purchases have not improved significantly since May 2020.
• The recent intensification of the COVID-19 pandemic has weakened the short-term outlook for the euro economy. It has not derailed its recovery, however.

From the U.S

It was also a relatively busy day. Key stats included the weekly jobless claims and finalized GDP numbers for Q42020.

In the week ending 19^th March, initial jobless claims fell from an upwardly revised 781k to 684k. Economists had forecast a fall to 730k. It was the first time that initial jobless claims had fallen below 700k since the jump to 3,283k in the week ending March 20^th, 2020.

Of less influence were the GDP numbers, following the FED’s bullish outlook on the economic recovery.

In the 4^th quarter, the U.S economy grew by 4.3%, revised up from a previous estimate 4.1%. In the 3^rd quarter, the economy had expanded by 33.4%.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Volkswagen rallied by 3.81%, with BMW and Daimler rising by 2.09% and 1.70% respectively. Continental saw a more modest 0.81% gain on the day.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank fell by 0.44% and by 2.46% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 0.57% and by 0.17% respectively, with Soc Gen declining by 1.20%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 2.55%, while Renault ended the day with a loss of 0.80%.

Air France-KLM declined by 1.44%, while Airbus SE rose by 0.54% on the day.

On the VIX Index

It was back into the red for the VIX on Thursday, marking an 11^th fall from 15 sessions.

Reversing a 4.43% rise from Wednesday, the VIX fell by 6.56% to end the day at 19.81.

The NASDAQ rose by 0.12%, with the Dow and the S&P500 gaining by 0.62% and 0.52% respectively.

The Day Ahead

It’s a relatively busy day ahead on the European economic calendar. German business sentiment and 4^th quarter GDP numbers from Spain are due out later today.

Germany’s business sentiment figures for March will garner plenty of interest.

From the U.S, inflation and personal spending numbers for February will also influence later in the session.

Away from the economic calendar, COVID-19 news updates will need continued monitoring on the day.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 21 points.

For a look at all of today’s economic events, check out our economic calendar.