European Equities: Futures See Red as EU Member States Fail the EU Project Once More
Economic Calendar:
Friday, 24th April
German IFO Business Climate Index (Apr)
The Majors
It was a 2nd consecutive day in the green for the European majors on Thursday. The DAX30 rose by 0.95% to lead the way, with the CAC40 and EuroStoxx600 seeing gains of 0.94% and 0.89% respectively.
Economic data delivered a blow in the early part of the session with private sector PMI levels falling to record lows in April. While the markets had anticipated another step lower, the numbers were far worse than had been forecasted.
Support came from rising crude oil prices and hopes of further stimulus support from EU member states to combat the impact of COVID-19 on the economy.
News of France planning on joining Germany and Italy in reopening on 11th May was also market positive on the day.
The Stats
It was a particularly busy day on the Eurozone economic calendar on Thursday. Key stats included private sector PMI numbers for France, Germany, and the Eurozone and German consumer sentiment figures.
German Consumer Climate
From Germany, the GfK Consumer Climate Index tumbled from 2.3 to -23.4 for May, which fell well beyond a forecasted -1.8.
According to the GfK,
The impact of the coronavirus pandemic and containment measures led the Index to a record low for May.
Consumers are assuming that Germany will fall into a tough recession, leading to the Indicator hitting a record low
Income expectations tumbled, with the Indicator sliding by 47.1 points to -19.3 points. This was the largest monthly fall on record.
The propensity to buy slid by 36 points to -4.6 points, leaving it 58 points lower than last year. Uncertainty over what lies ahead weighed heavily as did actual income losses suffered along with concerns over labor market conditions.
In contrast, the economic expectations indicator fell by just 2.2 points to -21.4. The Indicator remained higher than the -26 points recorded in May 2009… The hope of a v-shaped rebound likely prevented a more material decline.
April Prelim Private Sector PMIs
The April PMI numbers took another hit in April, according to prelim figures, with the lockdown sinking the services sector…
In France, the Manufacturing PMI fell from 43.2 to 31.5, with the Services PMI falling from 27.4 to 10.4. As a result of the slide, the composite fell from 28.9 to 11.2. Economists had forecast a Composite PMI of 26.0.
Germany’s Manufacturing PMI slid from 45.4 to 34.4, with the Services PMI tumbling from 31.7 to 15.9. The Composite PMI fell from 35.0 to 17.1.
The Eurozone’s manufacturing PMI fell from 44.5 to 134-month low 33.6, with the Services PMI falling from 26.4 to a record low 11.7. Economists had forecasts a Manufacturing PMI of 39.2 and a Services PMI of 23.8.
In April, the Composite PMI fell from 29.7 to a record low 13.5, which was far worse than a forecasted 25.7.
According to the Eurozone’s prelim Markit Survey,
The Flash Eurozone Services PMI Activity Index fell to a record low, with the Manufacturing Output Index also seeing a record low.
Both business activity and employment saw their steepest declines on record.
Service sector activity bore the brunt of the impact from the lockdown measures.
Overall inflows of new business fell at the steepest rates on record across both sectors.
Backlogs depleted at a record pace as a result of the lack of new business.
Jobs were cut to the greatest extent on record, with a record rate of job cuts across the services sector weighing. Manufacturing payrolls declined at the sharpest pace since April 2009.
From the U.S
Initial jobless claims rose by 4.427m in the week ending 17th April. While not at 6m levels, it was on the high side once more.
Both manufacturing and service sector activity took another hit, with the all-important services PMI falling from 39.8 to 27.0. This was a new series low, with the Composite PMI also falling to a new series low 27.4. For the less important manufacturing PMI, it was a 133-month low in April…
The Market Movers
For the DAX: It was a mixed day for the auto sector on Wednesday. Volkswagen fell by 0.45% to buck the trend. BMW, Continental, and Daimler saw gains of 0.79%, 1.13% and 1.29% respectively.
It was a bullish day for the banks, however, with Commerzbank and Deutsche Bank rising by 3.89% and by 1.88% respectively.
Deutsche Lufthansa continued its descent, with a 2.04% slide coming off the back of a 1.59% decline on Wednesday.
From the CAC, the banking sector found further support on Thursday. BNP Paribas and Soc Gen rallied by 6.25% and by 5.18% respectively, with Credit Agricole gaining 4.35%.
The auto sector also found support, with Peugeot and Renault rising by 0.16% and by 4.16% respectively.
Air France-KLM and Airbus SE avoided the red, with gains of 1.20% and 1.35% respectively.
On the VIX Index
It was 2nd consecutive day in the red for the VIX. Following on from a 7.55% slide on Wednesday, the VIX fell by 1.43% to end the day at 41.4.
The upside for the VIX failed to arrive in spite of new series lows for the U.S Composite and Services PMI in April.
Downward pressure came from talk of easing lockdown measures and rising crude oil prices, though the fall was minor.
Late in the day, the VIX found support on news that a treatment drug Remdesivir was not successful at treating coronavirus patients.
The S&P500 and NASDAQ slipped by 0.05% and by 0.01% respectively, while the Dow eked out a 0.17% gain on the day.
The Day Ahead
It’s a relatively busy day ahead on the Eurozone economic calendar. Germany’s Ifo Business Climate Index figures for April are due out later this morning.
Following some particularly dire PMI numbers and consumer sentiment figures, the stats are unlikely to have a material impact.
Expect market direction to come from crude oil prices, COVID-19 numbers, and the outcome of the EU Summit going into the weekend.
Once more EU leaders failed to find to deliver a meaningful aid package to combat the impact of COVID-19 on the economy on Thursday
Germany, Sweden, and the Netherlands, amongst other Northern EU countries, were against ideas floated by Spain. The outcome of the Summit will overshadow any upbeat sentiment towards easing lockdown measures…
On Thursday, the number of new coronavirus cases rose by 80,696 to 2,715,614. This was up marginally from a 78,442 increase on Wednesday.
France, Germany, Italy, and Spain reported 8,068 new cases on Thursday, which was down from 11,603 new cases on Wednesday. From Germany and Spain, it was a 3rd consecutively daily increase. In spite of this, the daily increases remained well below the numbers seen last week.
From the U.S, the total number of cases rose by 30,926 to 879,430. On Wednesday, the total number of cases had risen by 29,760. On Thursday of last week, the total number of new cases in the U.S had risen by 31,292…
While the COVID-19 numbers continued on the downward trend, negative news on the drug treatment will also be market negative.
In the futures markets, at the time of writing, the DAX was down by 216.5 points, with the Dow down by 140 points.
This article was originally posted on FX Empire