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Bob Mason

The Majors

It was a bullish week for the European majors, with Tuesday rally delivering the lion’s share of the gains for the week.

With economic data on the lighter side, updates on the spread of the coronavirus and monetary policy were key drivers.

Through the week, the markets responded favorably to a downward trend in the number of new cases and deaths.

Following a 42,323 increase in the number of new cases last Saturday, a 29,916 increase on Tuesday was the only spike in the week. On Wednesday, there were just 13,365 new cases reported.

On Thursday, the majors got a much-needed boost as the FED stepped in once more to deliver support. This time around it was by way of a $2.3tn program to support local governments and small to medium-sized businesses.

The program would offer 4-year loans to companies of up to 10,000 employees and also buy municipal bonds.

For the shortened week, the DAX30 rallied by 10.91%, with the CAC40 and EuroStoxx600 gaining 8.48% and 7.36% respectively.

The Stats

It was a relatively quiet week on the Eurozone economic calendar.

Key stats in the week included February factory orders, industrial production and trade data for Germany.

It was a mixed bag on the economic data front. But with the markets showing little interest to February numbers, there was a muted impact on the majors in the early part of the week.

Factory orders slid by 1.4%, following a 4.8% surge in January, with industrial production rising by just 0.3%. In January production had jumped by 3.2%.

Germany’s March Manufacturing PMI had been particularly dire, which ultimately limited the impact of the numbers this week.

On Thursday, a widening in Germany’s trade surplus from €18.7bn to €21.6bn also failed to support, with the global supply now chain broken.

The ECB minutes revealed some disagreement over the throwing in the kitchen sink and what moves to make to support the Eurozone economy. Not too dissimilar to the lack of progress on the corona bonds, a number of member states were less keen on certain policy measures than others.

From the U.S, while the FED delivered a much-needed injection, economic data was far from impressive once more.

With stats limited to February JOLTs job opening numbers in the 1st half of the week, it was Thursday’s stats that drew attention.

In the week ending 3rd April, initial jobless claims jumped by another 6.606m, following a 6.867m rise from the previous week.

Consumer sentiment, unsurprisingly, also took a hit in April, with the Michigan Consumer Sentiment Index sliding from 89.1 to 71.0.

The Market Movers

From the DAX, it was a particularly bullish week for the auto sector. Continental, Daimler, and Volkswagen surged by. 22.56%, 20.36% and by 24.74% respectively. BMW saw a more modest 14.64% gain.

It was also a bullish week for the banking sector. Commerzbank rose by 9.94%, with Deutsche Bank rallying by 12.48%.

Lufthansa also found support, with a 10.22% gain reversing most of an 11.58% slide from the previous week.

From the CAC, the banks also found strong support following last week’s sell-off. Soc Gen led the way, rallying by 17.34%. BNP Paribas and Credit Agricole weren’t far behind, however, with gains of 14.38% and 15.78% respectively.

The French auto sector also rebounded, with Renault and Peugeot ending the week up by 17.27% and 13.55% respectively.

Air France-KLM managed to avoid red in the week once more, rising by 6.19%, with Airbus rallying by 23.21%.


On the VIX Index

It was another week in the red for the VIX, which fell by 10.96% in the week ending 9th April. Following a 28.59% slide from the previous week, the VIX ended the week at 41.7.

The downside came in a shortened week that saw the U.S equity markets rebound. The S&P500 rallied by 12.10%, with the Dow and NASDAQ seeing gains of 12.67% and 10.59% respectively.

FED support and hopes of a peak in the spread of the coronavirus delivered the upside in the week. For the S&P500, it was reportedly the best week in more than 45-years…

The Week Ahead

It’s a relatively busy week ahead on the Eurozone economic calendar. Finalized inflation figures for France, Italy, Germany, Spain and the Eurozone are due out through the week. Barring a marked revision to prelim figures, however, the markets will likely brush aside the numbers.

February industrial production figures for the Eurozone will also have a muted impact on the majors on Thursday.

From elsewhere, economic data out of China and the U.S will influence, however.

China’s March trade figures on Wednesday and 1st quarter GDP and March industrial production figures on Friday will draw plenty of attention.

Out of the U.S, expect March retail sales and industrial production figures to provide direction, though April manufacturing numbers will likely have a greater impact. On Wednesday, the NY Empire State Manufacturing PMI is due out ahead of the Philly FED Manufacturing PMI on Thursday.

Following another 6m plus increase in initial jobless claims in the week ending 3rd April, the markets will be looking for better numbers next week.

Away from the economic calendar, the coronavirus numbers will continue to provide direction. Following a downward trend through most of last week, a spike on Thursday will make the weekend numbers all the more important…

For the European majors, news of the EU agreeing to a EUR500bn rescue package is positive. There will be some questions over whether the amount is enough, however…

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