European Equities: COVID-19 Updates and Sentiment towards the Economic Outlook to InfluenceIt could be a testy day ahead. While COVID-19 numbers reflect a slowdown in the number of new cases, the economic outlook looks bleak.
Tuesday, 18th February 2020
German ZEW Current Conditions (Feb)
German ZEW Economic Sentiment (Feb)
Eurozone ZEW Economic Sentiment (Feb)
Thursday, 20th February
German PPI (MoM) (Jan)
GfK German Consumer Climate (Mar)
French CPI (MoM) (Jan) Final
French HICP (MoM) (Jan) Final
Friday, 21st February
French Manufacturing PMI (Feb) Prelim
French Services PMI (Feb) Prelim
German Manufacturing PMI (Feb) Prelim
German Services PMI (Feb) Prelim
Eurozone Manufacturing PMI (Feb Prelim)
Eurozone Markit Composite PMI (Feb) Prelim
Eurozone Services PMI (Feb) Prelim
Italian CPI (MoM) (Jan) Final
Eurozone Core CPI (YoY) (Jan) Final
Eurozone CPI (MoM) (Jan) Final
Eurozone CPI (YoY) (Jan) Final
It was a bearish end to the week for the European majors, as the majors saw red for a 2nd consecutive day on Friday.
The CAC40 fell by 0.39% to lead the way down, with the EuroStoxx600 and DAX30 falling by 0.09% and by 0.01% respectively.
A combination of negative data out of the Eurozone coupled with the continued spread of COVID-19 pinned the majors back.
Following a major spike in new cases and the largest number of deaths since the start of the outbreak, figures on Friday failed to ease market jitters.
The figures suggested that the impact on the Chinese economy may be greater than had initially been projected. With the Eurozone’s manufacturing sector in the doldrums, it’s going to take some time before any recovery…
It was a relatively busy day on the Eurozone economic calendar on Friday. Key stats included 4th quarter GDP numbers out of Germany and 2nd estimate GDP numbers for the Eurozone.
Trade data out of the Eurozone and finalized inflation figures out of Spain had a muted impact on the day.
According to Destatis, the German economy stalled in the 4th quarter, with the economy growing by just 0.3% year-on-year. Economists had forecast 0.1% growth for the quarter and 0.2% growth year-on-year.
Compared with the previous quarter,
- The final consumption expenditure of both households and the government slowed down markedly.
- While gross fixed capital formation in machinery and equipment was down, fixed capital formation in construction and other fixed assets increased.
- Exports fell marginally in the quarter, while the imports of goods and services increased.
From the Eurozone, the economy grew by 0.1% in the 4th quarter, which was in line with the 1st estimate. Year-on-year, the economy grew by 0.9%, revised down from 1.0%, according to Eurostat.
While GDP numbers were negative, trade data was on the positive side. According to Eurostat, the Eurozone trade surplus widened from €20.7bn to €23.1bn in December.
- Exports of goods to the rest of the world increased by 4.8%, year-on-year, to €186.1bn.
- Imports from the rest of the world rose by just 1.1% to €163.0bn.
- Intra-euro area trade increased by 1% to €145.5bn.
In the period of January to December 2019, compared with January to December 2018:
- Euro-area exports of goods to the rest of the world rose by 2.7% to €2,345.4bn
- Imports over the same period increased by 1.5% to €2,119.7bn.
- The Euro area trade surplus widened from €194.6bn to €225.7bn.
- Intra-euro area trade increased by 0.9% to €1,965.1bn in Jan-Dec 2019 when compared with Jan-Dec 2018.
The Market Movers
For the DAX: it was a bearish day for the auto sector on Friday. BMW and Volkswagen led the way down, with losses of 0.56% and 0.80% respectively. Continental and Daimler saw more modest losses of 0.07% and 0.06% respectively.
Negative sentiment towards the outlook for the auto sector weighed at the end of the week.
It was a mixed day for the banks, however. Commerzbank rallied by 2.88%, while Deutsche Bank fell by -0.20% on the day.
Deutsche Lufthansa managed to avoid another day in the red with a 0.49% gain.
From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen both gained 0.21%, whilst Credit Agricole slid by 1.17%.
It was a bearish day for the auto sector, however, with Peugeot and Renault falling by 1.68% and by 0.90% respectively.
Renault’s earnings left the pair in the deep red on the day.
Net profit slumped by 99% to €19m in 2019, with contributions from Nissan tumbling by more than 80%. Net profit had stood at €3.5bn in 2018.
Air France-KLM struggled at the end of the week, with negative updates on COVID-19, contributing to a 0.40% fall on the day.
On the VIX Index
The VIX fell by 3.32% on Friday. Reversing a 2.98% gain from, the VIX ended the day at 13.7.
Mixed economic data out of the U.S on Friday coupled with updates on the new number of COVID-19 cases limited the downside.
The S&P500 and NASDAQ saw gains of 0.18% and 0.20% respectively on Friday, while the Dow fell by 0.09%.
The Day Ahead
It’s a quiet day ahead on the Eurozone economic calendar. With no material stats due out.
The markets will need to wait until tomorrow for ZEW economic sentiment figures due out of Germany and the Eurozone.
The February figures will give some idea of business sentiment towards the spread and anticipated impact of COVID-19 on Germany’s economy.
In the early hours of this morning, we saw GDP numbers out of Japan deliver an early warning of what may lie ahead…
The Japanese economy contracted by 1.6% in the 4th quarter, which was far worse than a forecasted 0.9%. In the 3rd quarter, the economy had grown by 0.4%. Year-on-year, the economy shrank by a whopping 6.3%, following 1.8% growth in the 3rd quarter. Economist had forecast a fall of 3.7%.
From the weekend, the latest numbers of COVID-19 were somewhat better, with just 2,009 new cases on Saturday. There were an additional 142 deaths, however, which took the total number of deaths to 1,669.
In the futures markets, at the time of writing, the DAX was up by 32 points, with the Dow up by 30 points.