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European Equities: Service Sector PMIs and COVID-19 Updates in Focus

The European majors could be in for another choppy day. Service sector PMIs and U.S nonfarm payrolls are likely to test market resilience…
Bob Mason

Economic Calendar:

Friday, 3rd April

Spanish Services PMI (Mar)

Italian Services PMI (Mar)

French Services PMI (Mar) Final

German Services PMI (Mar) Final

Eurozone Markit Composite PMI (Mar) Final

Eurozone Services PMI (Mar) Final

Eurozone Retail Sales (MoM) (Feb)

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The Majors

It was a positive but unconvincing day for the European majors on Thursday, with the EuroStoxx600 rising by 0.42% to lead the way. The CAC40 and DAX30 saw more modest gains of 0.33% and 0.27% respectively.

Economic data pinned back any major bounce back from Wednesday’s losses, with unemployment numbers spooking the markets.

In spite of the dire numbers, however, a surge in crude oil prices led to a late rebound to deliver the upside on the day.

Negative sentiment towards COVID-19 lingers, however, as the stats continue to reflect the effects of the continued rise in cases and extended lockdown.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Key stats were limited to Spanish unemployment change figures, leaving the European majors exposed to numbers out of the U.S.

Unemployment in Spain surged by 302.3k, reflecting the damage of COVID-19 on an already struggling labor market.

From the U.S, weekly initial jobless claims surged to 6.648m adding to the market angst on the day. Once more, economists were way off the mark, with a forecasted rise of 3.5m.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. BMW and Continental led the way with gains of 2.87% and 2.29% respectively. Daimler and Volkswagen saw more modest gains of 0.24% and 1.86% respectively.

It was also a bullish day for the banks, with Commerzbank and Deutsche Bank rising by 0.97% and by 1.15% respectively.

Deutsche Lufthansa found modest support on the day, rising by just 0.62%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.68% and 0.36% respectively, while Credit Agricole fell by 1.39%.

It was also a mixed day for the auto sector following Wednesday’s slide. Peugeot rallied by 4.26%, while Renault ended the day flat.

Air France-KLM joined its peers in the green with a 2.21% gain, while Airbus SE fell by 3.7% to spend yet another day in the red.

On the VIX Index

The VIX returned to negative territory on Thursday, sliding by 10.78%. Reversing a 6.57% gain from Wednesday, the VIX ended the day at 50.9.

Tracking the news wires, a late pullback left the VIX in the red as the markets responded to the crude oil price breakout on the day.

Late in the U.S session, the S&P500 recovered from the negative effects of the jobless claims numbers to end the day up by 2.28%. The Dow and NASDAQ weren’t far behind, with gains of 2.24% and 1.72% as Trump looked to restore crude oil price stability.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include March Service PMIs for Italy and Spain. Finalized PMIs for France, Germany and the Eurozone will also influence.

The markets are expecting quite dire numbers, with the EU in shutdown mode. Greater efforts to contain the spread of the virus may also lead to downward revisions to prelim figures…

From the U.S, expect nonfarm payrolls and March ISM Non-Manufacturing PMI figures to also provide direction.

Eurozone retail sales figures for February will likely have a muted impact on the day.

Outside of the numbers, the markets will also be in search of a slowdown in the spread of the coronavirus. The latest numbers suggest that there has yet to be a marked slowdown in spite of the extended lockdown. From the previous day, the number of cases did ease off, however.

At the time of writing, the total number of coronavirus cases across France, Germany, Italy, and Spain rose by 21,544 to 371,206. On the previous day, the combined number of cases had risen by 24,022. In the U.S, the total number of cases jumped from 214,482 to 244,433. That took the total number of cases globally to 1,014,499.

In the futures markets, at the time of writing, the DAX was up by 15.5 points, while the Dow was down by 174 points.

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