European Equities: The Futures Point to a Positive Open with no Stats to Rock the Boat…
The mini-rally continued in what became a gravity-defying act, with the CAC40 and EuroStoxx600 gaining 2.55% and 2.51% respectively to lead the way. The DAX30 saw a more modest 1.28% gain on Thursday as the majors rebounded from early losses.
Hope prevailed on the day as the markets bet on the stimulus package to support the U.S economy and U.S workers. The move came in response to the U.S weekly jobless claims figures.
Closer to home, updates on the coronavirus were certainly market negative, however.
The number of deaths in Spain surpassed those in China, with the number of cases in the U.S jumping by 10,000 in a single day.
Early in the Asian session, the DAX had been in positive territory before hitting reverse ahead of the European open.
Concerns over whether the US$2tn stimulus package will be enough likely contributed to the downside.
It was a quieter day on the Eurozone economic calendar on Thursday. German GfK Consumer Climate Index for April was in focus along with the ECB’s Economic Bulletin.
In April, Germany’s GfK Consumer Climate Index tumbled from 9.8 to 2.8 in April. Economists had forecast fall to 7.1.
According to the April GfK report,
- At 2.7 points, the index fell to its lowest level since May 2009.
- Consumers are preparing for tough times ahead, with the Economic Expectations sub-Index falling by 20.4 points to -19.2 in March. This was the lowest figure since August 2012…
- Income expectations took a sharp decline, with the Income Expectations Indicator falling by 13.4 points to 27.8. This was the lowest level since March 2013.
- Reduced working hours and concerns over the unstable employment situation and rising unemployment numbers weighed.
- Consumers also tightened the purse strings, with the Propensity to Buy Indicator sliding by 22.2 points to 31.4 points. This was the lowest figure since June 2013.
The survey was taken between 4th and 16th March, which was before there was a marked acceleration in the spread of the virus.
From the ECB, the Economic Bulletin did little to change the mood. Salient points from the March Bulletin included:
- Annual real GDP is projected to increase by 0.8% in 2020 and by 1.3% in 2021 and 1.4% in 2022.
- Compared with December 2019, real GDP for 2020 was revised down by 0.3 percentage points and by 0.1 percentage points for 2021. The revisions were mainly attributed to the coronavirus pandemic.
- Risks surrounding the euro area growth outlook are clearly on the downside.
- The spread of the coronavirus adds a new and substantial source of downside risk to the growth outlook, in addition to risks related to geopolitical factors, rising protectionism, and vulnerabilities in emerging economies.
- Inflation expectations are also negative, attributed to a sharp decline in current and future oil prices.
- Annual HICP inflation is projected to ease to 1.1% in 2020, 1.4% in 2021 and 1.6% in 2022.
From the U.S
It was all eyes on the weekly initial jobless claims numbers, which were certainly eye-watering. Initial jobless claims surged to 3.283m, which was incomparable to a previous high 650k hit back in the 1980s. Economists had forecast a rise of just 1.650m.
There was little interest in the rest of the stats that included finalized 4th quarter GDP numbers and February trade data.
The Market Movers
For the DAX: It was another mixed day for the auto sector. Daimler bucked the trend on Thursday, with a 0.91% loss. It was bullish for the rest of the sector, however. Continental led the way, rallying by 3.99%. BMW and Volkswagen also found further support, rising by 2.41% and 0.54% respectively.
It was also a mixed day for the banks, with Commerzbank rising by 2.71%, while Deutsche Bank slipped by 0.17%.
Deutsche Lufthansa ended the day flat.
From the CAC, it was another bullish day for the banks. BNP Paribas rallied by 3.27% to lead the way, with Credit Agricole and Soc Gen rising by 0.24% and 2.17% respectively.
The auto sector also found further support, with Peugeot and Renault rising by 2.36% and 5.78% respectively.
Air France-KLM avoided the red once more with a 0.08% gain. Airbus SE surged by 20.46% off the back of a 7.2% gain on Wednesday.
On the VIX Index
The downward trend on the VIX resumed on Thursday, with a 4.61% fall reversing 2 consecutive days in the green. Following a 3.7% gain from Wednesday, the VIX ended the day at 61.0.
Economic data from the U.S failed to spook the markets, in spite of the weekly jobless claims figures surging by more than 3m.
Hope over despair delivered support to the U.S equity markets, which ultimately weighed on the VIX on the day.
The dire jobless claims figures for last week came in the wake of the Senate eventually passing the Stimulus Bill.
On the day, the S&P500 rallied by 4.29%, with the Dow and NASDAQ not far behind.
The Day Ahead
It’s a particularly quiet day ahead on the Eurozone economic calendar, with no material stats due out of the Eurozone to provide direction.
A lack of stats will leave the majors in the hands of the news wires. The markets will continue to eye the coronavirus numbers. For now, the question will likely be whether central banks and governments have done enough.
EU member states will need to do more to find common ground in a bid to combat the virus. A virtual EU Summit on Thursday failed to deliver, as divisions across member states resulted in a deadlock. Expect any further chatter to influence.
From the U.S, personal spending and inflation figures for February will likely have a muted impact. Finalized Consumer Expectation figures for March could garner some interest, however.
Ahead of the European, February industrial profit numbers out of China could set the tone early in the day.
In the futures markets, at the time of writing, the DAX was up by 57.5 points, with the Dow up by 37 points.