European Equities: Private Sector PMIs to Give a Sense of the Damage

The Majors

It was back into the red for the European majors at the start of the week, with the EuroStoxx600 sliding by 4.3% to lead the way down. The DAX30 and CAC40 weren’t far behind, with losses of 2.1% and 3.32% respectively.

While the markets continued to balk at the rising number of coronavirus cases across Europe and the U.S, it was failings in the U.S that did the damage.

News of the U.S government coming to an impasse on the COVID-19 Stimulus Bill added to the downward pressure on the majors.

The markets had been expecting a bipartisan passing of the Bill only to read of quite the opposite over the weekend.

Late in the session, there was brief support following another bazooka from the FED. The FED came to the rescue with a range of measures, this time around assuring rather than spooking the markets.

The upside was brief, however, with the failed stimulus plan from the U.S and continued spread of the virus ultimately weighing. From Europe and the U.S, the news wires certainly didn’t help the cause, as the markets continued to get bombarded with negative news.

Airlines announced the grounding of entire fleets, while governments continued to enforce stricter containment measures. The stricter measures spell more bad news for the global economy. On the policy front, the jury is also still out on just how much impact fiscal and monetary policy moves will have near-term.

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. The Eurozone’s flash consumer confidence for March was in focus.

The Eurozone’s consumer confidence indicator fell from -6.6 to -11.6 in March, according to prelim figures. Economists had forecast a slide to -14.2. Better than forecast numbers were of little consolation on the day, however.

From the U.S, there were no material stats to influence, leaving the impasse on Capitol Hill in focus.

The Market Movers

For the DAX: It was a mixed day for the auto sector. BMW fell by 0.01% to buck the trend on the day. Continental and Daimler found strong support, rallying by 4.15% and 4.07% respectively, with Volkswagen gaining 2.87%.

It was also a mixed day for the banks. Commerzbank slid by 3.00%, while Deutsche Bank rose by 4.5%.

Deutsche Lufthansa was back into the red on the day, falling by 1.57%.

From the CAC, it was also a particularly bearish day for the banks. BNP Paribas slid by 7.34%, with Credit Agricole and Soc Gen falling by 4.10% and by 6.03% respectively.

It was also a bearish day for the auto sector. Peugeot and Renault slid by 4.33% and by 5.35% respectively.

Air France-KLM joined its peers in the red, sliding by 4.12 with Airbus SE tumbling by 13.77%.

On the VIX Index

The VIX saw its 3^rd consecutive day in the red on Monday, falling by 6.74%. Following on from an 8.28% slide from Friday, the VIX ended the day at 61.6.

The downside in the VIX came in spite of the S&P500 hitting reverse once more on Monday, with a 2.93% fall on the day.

With the VIX now off last week’s high of 85.5, some pressure eased on the U.S equity markets though it is unlikely to spell the end of the downtrend.

There’s still a long way to go before governments successfully contain the spread of the virus and economic conditions return to normal.

That’s before even assessing the impact of the coronavirus on the U.S and global economies.

The Day Ahead

It’s a particularly busy day ahead on the Eurozone economic calendar. March prelim private sector PMIs are due out of France, Germany, and the Eurozone.

The markets may be expecting dire numbers, but seeing them is a completely different story. Perhaps of greater concern is the fact that these are March prelim numbers. The EU went into shut down mode in the 2^nd half of the month. That suggests finalized numbers to be far worse and a quicker pace of contraction in April, assuming that March numbers are dire…

Economists had anticipated a rebound in the 2^nd quarter, which was likely based on an assumption that the EU would see little impact. The markets will need to assume that this will continue through to May at the earliest, which also writes off the 2^nd quarter.

From the U.S, private sector PMIs for March are also in focus and, while we may see slightly better numbers, there will likely be worse to come…

On the political front, there will also be the U.S stimulus package to consider. A passing of the Bill would be market positive…

In the futures markets, at the time of writing, the DAX was up by 264 points, with the Dow up by 553 points.