It was a relatively bullish start to the week for the European majors, with the EuroStoxx600 rising by 0.67% to lead the way. The CAC40 and DAX30 weren’t far behind, with gains of 0.65% and 0.47% respectively.
Economic data took a back seat once more, as the European markets grappled with news of easing containment measures in the EU and sliding crude oil prices.
With the number of new cases easing, there was also support from a slowdown in the number of coronavirus deaths going into the week. The release of the numbers coincided with news Germany easing lockdown measures.
Weighing on the majors, however, was an unprecedented slump in U.S futures, with the May contract falling into negative territory.
From the U.S, there had also been reports of a jump in new COVID-19 cases in Boston and Chicago.
Coupled with the new hot spots in the U.S, tumbling crude oil prices weighed on riskier assets on Monday. The concern over demand had supported the bears on the day, leading to a mid-session reversal in the European majors.
The improved COVID-19 numbers from the EU and easing lockdown measures in the EU ultimately prevailed, delivering a late recovery from the earlier losses.
The Stats
It was a relatively quiet day on the Eurozone economic calendar on Monday. March wholesale inflation figures from Germany and February trade data for the Eurozone were in focus.
According to Destatis, wholesale prices fell by 0.8% in March, following a 0.4% decline in February. Economists had forecast a 0.7% decline.
Energy prices were down by 3.1%, month-on-month.
Year-on-year, energy prices fell by 4.7%, contributing to a 0.8% decline in wholesale prices.
Prices of intermediate goods decreased by 2.1%, year-on-year. (Month-on-month, prices fell by 0.3%).
Bucking the trend, however, was a 4.2% increase in prices of non-durable consumer goods. (Month-on-month, prices rose by 0.3%).
The markets brushed aside the numbers, however, with deflationary pressures likely to build further in April.
On trade, the Eurozone’s trade surplus widened from a €1.3bn surplus to a €23.0bn surplus in February.
Exports of goods to the rest of the world increased by 1.6% to €189.3bn when compared with February 2019.
Imports from the rest of the world fell by 1.0% to €166.3bn, year-on-year.
In February 2019, the trade balance had stood at €18.5bn.
Intra-euro area trade fell by 0.6% to €161.5bn compared with February 2019.
From the U.S, there were no material stats to influence later in the day, leaving the majors in the hands of COVID-19 news.
Earlier in the day, the PBoC had delivered further monetary policy support following last week’s 1st quarter GDP numbers. The PBoC cut 1-year loan prime rates by 20 basis points to 3.85% and 5-year LPRs by 10 basis points to 4.65%.
While supporting the CSI300, the cuts failed to support the broader equity markets on the day.
The Market Movers
For the DAX: It was a bearish day for the auto sector on Monday. BMW and Volkswagen fell by 2.62% and by 1.29% respectively. Continental and Daimler saw heavier losses of 4.69% and 3.69% respectively.
It was also a mixed day for the banks, however. Commerzbank rose by 0.60%, while Deutsche Bank slid by 2.93%.
Deutsche Lufthansa ended the day flat.
From the CAC, it was also a mixed day for the banks. BNP Paribas rose by 0.88%, while Credit Agricole and Soc Gen fell by 0.21% and 0.01% respectively.
The auto sector also had a mixed day after Friday’s rally. Peugeot fell by 0.30%, while Renault rose by 1.82%.
Air France-KLM eked out a 0.25% gain, while Airbus SE fell by 2.08%.
On the VIX Index
The VIX saw only its 2nd day in the green out of the last 6 on Monday. Reversing a 4.89% decline from Friday, the VIX jumped by 14.89% to end the day at 43.8.
Easing lockdown measures were overshadowed by a historic slump in crude oil prices at the start of the week.
While Brent’s June contract saw a relatively modest loss, WTI’s May contract tumbled into negative territory as concerns over demand gripped.
On Monday, the S&P500 fell by 1.79%, with the Dow and NASDAQ declining by 2.44% and 1.03% respectively.
The Day Ahead
It’s another relatively quiet day ahead on the Eurozone economic calendar. German and Eurozone ZEW economic sentiment figures for April are due out.
Any further downside in the ZEW numbers would likely have a muted impact on the Majors. The markets are expecting sentiment and confidence in April to be materially impacted by the lockdown across the EU.
From the U.S, March existing home sales figures will likely have a muted impact. It will be a different story when it comes to the April and May numbers, however.
Outside of the numbers, expect updates on COVID-19 and member state plans across the U.S and the EU to also influence.
At the start of the week, the number of new coronavirus cases increased by 73,685 to 2,481,026. This was a slowdown from Sunday when the total number of new cases had risen by 82,610.
Across France, Germany, Italy, and Spain, the total number of new cases rose by 7,604, which was down from 13,496 on Sunday. A downward trend was not reported from the U.S, however. New cases increased by 28,494 on Monday, following 27,475 new cases on Sunday.
In the futures markets, at the time of writing, the DAX was down by 86.5 points, while the Dow was up by 93 points.
