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Bob Mason
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Economic Calendar:

Thursday, 8th April

German Factory Orders (MoM) (Feb)

German IHS Markit Construction PMI (Mar)

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Friday, 9th April

German Industrial Production (MoM) (Feb)

German Trade Balance (Feb)

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The Majors

It was a relatively bearish day for the European majors on Wednesday, after Tuesday’s visit to new record highs.

The DAX30 and the EuroStoxx600 fell by 0.24% and by 0.22% respectively, with the CAC40 slipping by 0.01%.

For the majors, Wednesday’s pause in the upward trend came in spite of positive economic data from the Eurozone early in the session.

With the EU now focused on ramping up the vaccination rate and with the private sector returning to growth, further upward momentum is anticipated.

Downside risks do remain, however, these being a shift in monetary policy and COVID-19. Failure to ramp up vaccination rates or a new resilient strain of the coronavirus would test market optimism…

The Stats

It was a busier start to the day on the economic calendar today. Following some impressive manufacturing PMI numbers last week, the services sector was in the spotlight this morning.

Service Sector PMIs for March

Service sector PMI figures for Italy and Spain were in focus in the early part of the European session.

Finalized PMI numbers for France, Germany, and the Eurozone were also in focus.

In March, Spain’s services PMI increased from 43.1 to 48.1. Economists had forecast a rise to 46.0.

Italy’s services PMI slipped from 48.8 to 48.6, however falling short of a forecasted 49.0. For Italy’s services sector, business activity fell once more, with new work also declining. As a result, firms reduced headcount at the end of the quarter.

For France, the services PMI increased from 45.6 to 48.2. This was up from a prelim 47.8. The sector contracted at the slowest pace in 3-months, with the rate of new business also falling at the slowest pace in 3-months. Job creation rose at its strongest since before the pandemic.

Germany’s services PMI rose from 45.7 to 51.5. This was up from a prelim 50.8. The upward revision led to an upward revision of Germany’s composite from 56.8 to 57.3. In February, Germany’s composite had stood at 51.1.

An easing of lockdown measures helped lift service sector activity. The pace of hiring also increased at a faster pace in spite of rising cost pressures. Optimism jumped to its highest level since March 2018, supported by hopes of an effective COVID-19 vaccine program.

Eurozone Private Sector Activity

In March, the Eurozone’s services PMI increased from 45.7 to 49.6. This was up from a prelim 48.8.

A jump in manufacturing sector activity and a slower contraction in service sector activity led to a rise in the composite PMI.

The composite PMI increased from 48.8 to 53.2 in March, which was up from a prelim 52.5.

According to the finalized Markit survey,

  • Driven by a record increase in manufacturing output, the Eurozone’s private sector economy returned to growth in March.
  • The Composite Output Index rose to its highest level since last July.
  • Service sector output fell at its slowest pace in the current 7-month sequence of contraction.
  • An increase in new orders supported the pickup in overall private sector activity.
  • Overall, new sales rose at its sharpest degree in two-and-a-half years, driven by both domestic and overseas demand.
  • New export business increased at the strongest pace in over six-and-a-half years.
  • As a result of increased demand, backlogs of unfinished business rose for the first time since November 2018.
  • The pace of hiring rose at the most marked pace since June 2019, with both manufacturing and services hiring.
  • Business confidence improved to a 37-month peak at the end of the 1st

From the U.S

It was a quieter day on the economic calendar, with economic data limited to trade data.

In February, the U.S trade deficit widened from $67.8bn to $71.1bn.

The stats had a muted impact on the European majors, however, with impressive private sector PMI and labor market figures supporting the particularly optimistic U.S economic outlook.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Volkswagen slid by 1.61%, with BMW ended the day with a 0.46% loss. Continental and Daimler found support, however, rising by 0.14% and by 0.25% respectively.

It was also a mixed day for the banks. Deutsche Bank rose by 1.57%, while Commerzbank slipped by 0.15%.

From the CAC, it was a relatively bullish day for the banks. BNP Paribas and Credit Agricole rose by 0.65% and by 0.47% respectively, with Soc Gen gaining 0.07%.

It was a bearish day for the French auto sector, however. Stellantis NV slipped by 0.01%, with Renault declining by 1.27%.

Air France-KLM rallied by 5.06% supported by the assurances of government support, while Airbus SE fell by 0.16%.

On the VIX Index

It was back into the red for the VIX on Wednesday, following two consecutive days in the green.

Reversing a 1.17% gain from Tuesday, the VIX fell by 5.30% to end the day at 17.16.

The NASDAQ fell by 0.07%, while the Dow and the S&P500 rose by 0.05% and by 0.15% respectively.

The Day Ahead

It’s a quieter day ahead on the European economic calendar. German factory order figures for February are due out later today.

The markets will be looking for positive numbers to be aligned with the upward trend in the survey-based PMI numbers.

On the monetary policy front, the ECB monetary policy meeting minutes will also draw attention later in the day.

Following the last ECB press conference and the promise to ramp up bond purchases, any resistance to continued and unwavering support would weigh on the majors.

From the U.S, it’s another quiet day on the economic calendar. The weekly jobless claims figures will draw attention later in the session.

We can expect some resilience to an uptick in claims, however, following last week’s NFP numbers for March.

Away from the stats, expect increased sensitivity to any negative news updates on COVID-19 and any pick up in geopolitical risk.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 53 points, with the DAX up by 63 points.

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

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