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European Equities: Service Sector PMIs and German Unemployment in Focus

By:
Bob Mason
Updated: Jun 3, 2020, 07:42 UTC

The futures point to another positive open ahead of a busy day on the economic calendar. Service sector PMIs will need to impress...

Depositphotos_57621859_s-2019

Economic Calendar:

Wednesday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

German Unemployment Change (May)

German Unemployment Rate (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Eurozone Unemployment Rate (Apr)

Thursday, 4th June

Eurozone Retail Sales (MoM) (Apr)

ECB Monetary Policy Decision (Jun)

ECB Press Conference

Friday, 5th June

German Factory Orders (MoM) (Apr)

The Majors

It was 2nd consecutive day in the green for the European majors on Tuesday, with the DAX30 rallying by 3.75% to lead the way.

The CAC40 and EuroStoxx600 saw more modest gains of 2.02% and 1.57% respectively, as the DAX30 played catch up after Monday’s close.

The upside on the day came in spite of lingering geopolitical risk and civil unrest across the U.S. Interestingly, it was reported that Chinese SOEs bought U.S soybeans at the start of the week, despite the orders from Beijing. Perhaps Beijing is also flexing its muscles. The markets won’t mind the chatter if it is nothing more…

Risk sentiment sent commodity currencies and the global equity markets into another rally, as the bears yet again failed to take control.

The narrative is simple and continues to drive demand for riskier assets. Fiscal and monetary policy, coupled with a more aggressive easing of lockdown measures, has resulted in hopes of a more marked economic rebound.

Central banks have certainly contributed to the swing in fortunes across the global financial markets.

The Stats

It was a quiet day on the Eurozone economic calendar on Tuesday. Spanish unemployment figures were in focus and provided some comfort in the early part of the day.

The figures came off the back of May’s manufacturing PMI on Monday that painted a better, yet grim picture…

There were no stats from the U.S to influence later in the day.

The Market Movers

For the DAX: It was a bullish start to the week for the auto sector on Tuesday. Daimler and Volkswagen rallied by 4.34% and by 3.79% respectively to lead the way. BMW and Continental saw more modest gains of 2.96% and 2.10% respectively.

It was also a bullish day for the banks. Deutsche Bank rallied by 2.49%, with Commerzbank surging by 7.83%.

Deutsche Lufthansa bucked the trend, however, sliding by 2.41% off the back of Friday’s 2.68% pullback.

From the CAC, bank stocks found further support on Tuesday. BNP Paribas and Soc Gen rallied by 2.97% and by 3.24% respectively, with Credit Agricole gaining by 2.30%.

The auto sector also saw green for a 2nd consecutive day, with Peugeot and Renault rising by 1.57% and by 1.10% respectively.

Air France-KLM and Airbus SE found strong support, with the pair rallying by 3.29% and by 7.17% respectively.

On the VIX Index

It was back into the red for the VIX on Tuesday. Reversing a 2.62% gain from Monday, the VIX fell by 4.92% to end the day at 26.84.

Once more, the markets brushed aside geopolitical risk and civil rest across the U.S. Optimism of an economic rebound drove demand for riskier assets on the day.

The S&P500 rose by 0.82%, with the Dow and NASDAQ gaining 1.05% and 0.59% respectively.

VIX 03/06/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Italy and Spain’s Service sector and Composite PMIs for May are due out later this morning.

While Italy’s Manufacturing PMI may have hit a 3-month high, we will be looking for service sector activity to drive the recovery.

Today’s stats will be key, though one does wonder whether any weak numbers will test the current sentiment…

Finalized services PMIs and Composite PMIs are also due out of France, Germany, and the Eurozone.

From Germany, May unemployment figures will also garner plenty of interest, though the EU’s recovery plan should be a cushion to another jump in May.

Later in the day, economic data from the U.S could have the final say. The markets preferred ISM Non-Manufacturing PMI for May is due out along with May’s ADP nonfarm employment change figures.

Another unprecedented slump in nonfarm employment and disappointing ISM numbers could test risk sentiment…

Away from the economic calendar, expect geopolitics, COVID-19 news, and events in the U.S to also provide direction.

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 112,694 to 6,470,911. On Monday, the number of new cases had risen by 95,146. The daily increase was higher than Monday’s rise and 95,878 new cases from the previous Tuesday.

France, Germany, Italy, and Spain reported 938 new cases on Tuesday, which was down from 1,018 new cases on Monday. On the previous Tuesday, 1,535 new cases had been reported. Significantly, all 4 member states reported less than 300 cases each for a 2nd consecutive day.

From the U.S, the total number of cases rose by 21,208 to 1,879,665 on Tuesday. On Monday, the total number of cases had risen by 21,287. On Tuesday 26th May, a total of 19,185 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 149 points, with the Dow up by 95 points.

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

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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