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European Equities: U.S Labor Market Numbers to Have the Final Say

By:
Bob Mason
Published: Jun 5, 2020, 01:50 UTC

Futures point to a testy start as the markets look ahead to U.S labor market numbers due out late in the session...

Depositphotos_63012897_s-2019

Economic Calendar:

Friday, 5th June

German Factory Orders (MoM) (Apr)

The Majors

It was the first day in the red in the week for the European majors on Thursday as the latest rally ran out of steam.

The losses were modest, however, with the EuroStoxx600 falling by 0.72% to lead the way down. For the CAC40 and DAX30, the pair slipped by 0.21% and 0.45% respectively.

Autos were amongst the worst hit after the latest bounce, with the losses coming in spite of the German government opening the coffers.

Germany’s coalition government had agreed to a €130bn COVID-19 stimulus package on Wednesday. Concerns over global demand, however, will likely linger until the stats start to reflect a pickup in demand.

ECB monetary policy and economic data from the U.S also influenced in the day.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. The Eurozone’s retail sales figures for April were in focus in the early part of the day.

Retail sales fell by 11.7% in April, following an 11.1% decline in March. Economists had forecast a 15% tumble.

According to Eurostat, compared with March 2020,

  • Automotive fuel sales slumped by 27.7%, non-food products by 17.0%, and food, drinks, & tobacco by 5.5%.
  • Malta (-25.1%) and Ireland (-21.9%) recorded the largest declines in total retail trade volume.
  • Compared with April 2019, total retail trade volumes tumbled by 19.6%.

Mid-way through the European session, the ECB was also in action.

In line with market expectation, the ECB left interest rates, deposit facility rate, and the marginal lending facility rate unchanged. The ECB did crank up the size of the emergency purchasing of bonds to €1.35tn and extended it by an additional 6-months to 30th June 2021.

The move provided support to the financial sector that had struggled alongside the auto sector earlier in the day.

From the U.S

Jobless claims figures were back in focus ahead of today’s nonfarm payroll and the unemployment rate for May…

Lockdown measures have continued to ease since mid-May, yet the weekly jobless claims continue to point to an upward trend in unemployment.

This is going to need to materially change course for the U.S economy to avoid an even more dire 2nd quarter. As things stand, aside from the weekly claims, it’s largely been survey-based data beyond the April line in the sand.

In the week ending 29th May, initial jobless claims jumped by 1.877mm, which worse than a forecast rise of 1.8m.

Other stats included April trade data and 1st quarter labor market figures that had a muted impact on the day.

With the FED due to deliver its June policy decision next week, along with the FOMC economic projections, today’s numbers suggest that far greater support is going to be needed.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday, bringing to an end a 2-day winning streak. Continental was the worst performer on the DAX30, sliding by 4.06%. Daimler and Volkswagen fell by 3.13% and by 1.84% respectively. BMW saw a more modest 0.76% loss on the day.

It was another bullish day for the banks, supported by the ECB’s move on Thursday. Deutsche Bank rallied by 2.17%, with Commerzbank rising by 1.61%.

Deutsche Lufthansa saw a 2nd day in the green, with a 1.94% rise off the back of a 5.58% gain on Wednesday.

From the CAC, it was a mixed day for the banks on Thursday. BNP Paribas fell by 0.36%, while Credit Agricole and Soc Gen saw gains of 0.83% and by 2.51% respectively.

The auto sector also saw a 3-day winning streak come to an end. Peugeot and Renault fell by 1.49% and by 1.48% respectively.

Air France-KLM and Airbus SE continued northwards, however, with gains of 1.68% and 5.22% respectively.

On the VIX Index

A 2-day run of losses came to an end on Thursday, with the VIX rising by 0.58%. Partially reversing a 4.40% fall from Wednesday, the VIX ended the day at 25.81.

Another jump in jobless claims from the U.S weighed on the U.S equity markets on the day. A continuation of unprecedented job losses late into May suggests that there could be some market sensitivity to the NFP numbers due out today…

The S&P500 saw its 1st day in the red in 5-days, with a 0.34% loss, with the NASDAQ falling by 0.69%. The Dow bucked the trend, with a 0.05% gain on the day.

VIX 05/06/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Germany’s factory orders for April are due out in the early part of the day.

April stats will continue to have a muted impact on the majors, however, which will leave the majors in the hands of stats from the U.S.

While nonfarm payrolls will draw plenty of attention, it may be the U.S unemployment rate that gives the majors a test. The markets were not happy with the weekly jobless claims figures, so we could see more red later today.

Away from the stats, expect chatter any the U.S administration and Beijing to also dictate risk appetite in the day.

If the current trend in new coronavirus cases continues, a continued easing in lockdown measures remains market positive. The markets may wonder, however, how long it will take before there is a marked pickup in economic activity and hiring.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 105,318 to 6,697,763. On Wednesday, the number of new cases had risen by 121,534. The daily increase was lower than Wednesday’s rise and 112,124 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 1,009 new cases on Thursday, which was down from 1,401 new cases on Wednesday. On the previous Thursday, 5,612 new cases had been reported.

From the U.S, the total number of cases rose by 22,303 to 1,923,731 on Thursday. On Wednesday, the total number of cases had risen by 21,763. On Thursday 28th May, a total of 21,763 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 23.5 points, while the Dow was up by 8 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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