European Equities: U.S Nonfarm Payrolls Could Be Too Dire to Ignore…

The Majors

It was back into the green for the European majors on Wednesday, with the CAC40 rising by 1.54% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 1.44% and 1.09% respectively.

Economic data from China coupled with corporate earnings delivered the upside on the day.

In spite of a 2^nd day in the green for the week, the majors remain in negative territory going into today.

On Thursday, the markets managed to brush aside yet another dire set of weekly jobless claims figure from the U.S and disappointing stats from the Eurozone.

An upward trend in new coronavirus cases also had a muted impact as governments push forward on plans to ease lockdown measures.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. Key stats were limited to french nonfarm payroll figures for the 1^st quarter and German industrial production figures for March.

Following the market reaction to some quite dire April figures in the week, 1^st quarter numbers had a relatively muted impact on the majors.

In the 1^st quarter, nonfarm payrolls slid by 2.30%, following a 0.4% rise in the 4^th quarter.

German industrial production figures also disappointed but failed to weigh on the majors. Production tumbled by 9.2% in March, month-on-month, which was the largest decline on record. Economists had forecast a 7.5% slide.

According to Destatis,

• Production in industry excluding industry and construction was down 11.6%.
• Within industry, production of intermediate goods declined by 7.4%, with the production of consumer goods sliding by 7.5%.
• The production of capital goods tumbled by 16.5%. The automobile industry recorded a 31.1% jump in production…
• Outside industry, energy production was down by 6.4%, while the production in construction rose by 1.8%.
• Year-on-year, industrial production fell by 11.6%.

From the U.S, the weekly jobless claims figures for the week ending 1^st May provided little support ahead of tomorrow’s NFP numbers.

Initial jobless claims rose by 3.169m, following a 3.846m rise in the week prior. Economists had forecast a 3m increase.

Ahead of the European open on Thursday, trade data out of China set the tone, with exports unexpectedly rising by 3.5%. Economists had forecast a 15.7% slide.

The Market Movers

For the DAX: It was a mixed day for the auto sector. BMW and Continental fell by 2.10% and 0.59% respectively, while Daimler and Volkswagen rose by 0.37% and 0.40% respectively. German auto production figures weighed on the sector on Thursday.

It was a bullish day for the banks, however, with Deutsche Bank and Commerzbank rising by 2.43% and by 1.09% respectively.

Deutsche Lufthansa saw red once more, with a 0.74% decline following Wednesday’s 3.30% slide.

From the CAC, the banking sector also found support following Wednesday’s pullback. BNP Paribas rose by 1.77%, with Credit Agricole and Soc Gen rallying by 2.54% and by 2.08% respectively.

It was a bearish day for the auto sector, however. Peugeot and Renault fell by 0.99% and by 0.05% respectively.

Air France-KLM saw red, with a 2.52% fall. The decline came off the back of a dire earnings forecast for the June quarter. Airbus SE avoided being dragged into the red, however, rallying by 3.82% on the day.

On the VIX Index

The choppy week continued for the VIX, which returned to the red on Thursday. Following a 1.52% gain on Wednesday, the VIX slid by 7.85% on Thursday to end the day at 31.4.

Corporate earnings and China stats delivered the upside on the day as the markets brushed aside another jump in initial jobless claims.

On Thursday, the S&P500 rose by 1.15%, with the Dow and NASDAQ closing out the day with gains of 0.89% and 1.41% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to Germany’s April trade figures.

While we do anticipate some market reaction to today’s numbers, expect U.S nonfarm payroll and unemployment figures to be the key driver.

On the geopolitical risk front, the threat of sanctions and tariffs on China continued to linger, with Iran also simmering in the background.

Friday has traditionally been Trump’s preferred day to send threats via Twitter… He will certainly want to distract the markets from today’s nonfarm payroll figures. It may not be enough, however, to divert the market attention from what is likely to be some shocking numbers later today.

We’ve also yet to see the markets react to the latest upward trend in new coronavirus cases…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 191,233 to 3,912106. On Wednesday, the number of new cases had risen by 87,960. The daily increase was far higher than Wednesday’s rise and 75,118 increase on the previous Thursday.

France, Germany, Italy, and Spain reported 16,103 new cases on Thursday, which was up from 9,651 new cases on Wednesday. On the previous Thursday, 7,182 new cases had been reported. All 4 member states saw a rise in new cases, with France and Spain reporting the highest increases on the day.

From the U.S, the total number of cases rose by 56,348 to 1,291,804 on Thursday. On Wednesday, the total number of cases had risen by 20,715. On Thursday, 30^th April, the total new number of cases had risen by 30,883.

In the futures markets, at the time of writing, the DAX was up by 82.5 points, with the Dow up by 123 points.