European Equities: Prelim Private Sector PMIs for April and Corporate Earnings in Focus
Friday, 23rd April
French Manufacturing PMI (Apr) Prelim
French Services PMI (Apr) Prelim
German Manufacturing PMI (Apr) Prelim
German Services PMI (Apr) Prelim
Eurozone Manufacturing PMI (Apr) Prelim
Eurozone Markit Composite PMI (Apr) Prelim
Eurozone Services PMI (Apr) Prelim
ECB President Lagarde Speaks
The European majors continued to find support following the sharp sell-off on Tuesday.
Leading the way was the CAC40, which rose by 0.91%. The DAX30 and the EuroStoxx600 saw more modest gains of 0.82% and 0.68% respectively.
Economic data, corporate earnings, and the ECB delivered support for the European majors on Thursday.
It was a busy day on the economic calendar on Thursday.
On the economic data front, French business confidence and Eurozone consumer confidence figures were in focus.
In April, the French Business Survey Index rose from 98 to 104. Economists had forecast an increase to 99.
From the Eurozone, the consumer confidence index rose from -10.8 to -8.1 in April, according to prelim figures. Economists had forecast for the indicator to hold steady at -10.8.
On the monetary policy front, the ECB left monetary policy unchanged, which was in line with market expectations.
One key area of focus was how the ECB responded to rising government bond yields after vowing to ramp up bond purchases.
According to the monetary policy statement,
- The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2%.
- Until at least March 2022, the Governing Council will continue to conduct net asset purchases under the PEPP. The total envelope of €1,850 will remain until the end of the 1st quarter of next year.
- Vis-à-vis purchases under the PEPP, the ECB expects purchases to continue to be conducted at a significantly higher pace than during the first months of the year.
- The envelope can be recalibrated if required to maintain favorable financing conditions.
- Net purchases under the APP will continue at a monthly pace of €20bn. This is likely to run for as long as necessary to reinforce the accommodative impact of its policy rates and to end shortly before it starts to raise key ECB interest rates.
- The Governing Council will also continue to provide ample liquidity through its refinancing operations. Funding obtained through TLTRO III plays a crucial role in supporting bank lending to firms and households.
With the statement assuring continued support, ECB President Lagarde talked of another possible contraction in the 1st quarter during the press conference.
It was not enough to sink the EUR or the European majors, however. Optimism towards a 2nd half of the year economic rebound provided support.
From the U.S
While it was a relatively quiet day, with jobless claims figures were in focus.
In the week ending 16th April, initial jobless claims fell from 586k to 547k. Economists had forecast an increase to 617k.
Existing home sales figures for March were also out but had a muted impact on the majors.
The Market Movers
For the DAX: It was a mixed day for the auto sector on Thursday. Daimler and Volkswagen fell by 0.99% and by 0.56% respectively. BMW and Continental found support, however, rising by 0.30% and by 1.54% respectively.
It was also a mixed day for the banks. Deutsche Bank slid by 2.18%, while Commerzbank rose by 0.64%.
From the CAC, it was a relatively bullish day for the banks. BNP Paribas gained 0.64%, with Credit Agricole and Soc Gen rising by 0.20% and by 0.38% respectively.
It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.25%, while Renault ended the day down by 1.33%.
Air France-KLM found much-needed support, rising by 0.88%, with Airbus SE rallying by 2.03%.
On the VIX Index
It was back into the green for the VIX on Thursday, marking a 3rd rise of the week.
Reversing a 6.32% fall from Wednesday, the VIX increased by 6.91% to end the day at 18.71.
The Dow and the NASDAQ both fell by 0.94%, with the S&P500 declining by 0.92%.
The Day Ahead
It’s a particularly busy day ahead on the European economic calendar. Key stats include prelim private sector PMI figures from France, Germany, and the Eurozone.
Expect market sensitivity to today’s stats. While the markets will be looking for manufacturing sector activity to continue to impress, the services sector will need to return to expansion.
With a fresh wave of new COVID-19 cases hitting major economies, slower growth in the manufacturing sector would test market resilience.
From the U.S, prelim private sector PMI figures will also be focus, with the services PMI the key driver.
Away from the economic calendar, COVID-19 news updates and corporate earnings will also need continued monitoring.
On the corporate earnings front, Daimler and Software deliver along with Amex later in the day.
In the futures markets, at the time of writing, the Dow Mini was up by 37 points, while the DAX was down by 67 points. Ahead of the European open, market reaction to U.S President Biden’s tax plans weighed on the DAX.
For a look at all of today’s economic events, check out our economic calendar.