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European Equities: The Futures Point Northwards ahead of German GDP Numbers

Bob Mason

Economic Calendar:

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

The recession sirens have been ringing this week and not the ones warning of a short-lived slump.

It was a 4th consecutive day in the red for the European majors, with the EuroStoxx600 sliding by 2.17% to lead the way.

The CAC40 and DAX30 weren’t far behind, with losses of 1.95% and 1.65% respectively.

Negative sentiment towards the economic outlook dawned on the global financial markets this week. Disappointing numbers, dovish central bank chatter, and stark warnings by disease experts sent the majors into a spin.

The downside came in spite of a lack of a material surge in new coronavirus cases across the EU. As we saw back in the 1st quarter, the East to West migration of the virus could deliver a 2nd wave across the EU should member states loosen containment measures too quickly.

FED Chair Powell’s comments didn’t help and continued to weigh on risk sentiment on Thursday, as did rising tensions between the U.S and China.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Key stats were limited to finalized April inflation figures out of Spain and Germany.

There were no major adjustments from prelim to influence the majors on the day, however.

The ECB Economic Bulletin also delivered few surprises on Thursday. A warning of a sharp economic contraction was delivered after 1st quarter GDP numbers for the Eurozone. The ECB did warn of an EU contraction to a degree never seen since the post-war era, however.

Commentary from the bulletin was largely aligned with ECB comments from the last press conference that limited market reaction.

From the U.S, the weekly jobless claims did little to limit the downside, with initial jobless claims surging by 2.981m in the week ending 8th May.

The markets had hoped for a marked pullback in claims, which failed to materialize. As labor market conditions deteriorate further, economic recovery would also become a lengthier process…

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Continental rose by 0.65% to buck the trend on the day. Daimler and BMW slid by 2.76% and by 1.77% respectively, while Volkswagen fell by a more modest 0.65%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.64%, while Commerzbank fell by 1.04%.

Deutsche Lufthansa rallied by 4.84% to reverse Wednesday’s 1.20% loss.

From the CAC, the banking sector continued to see red on Thursday. BNP Paribas fell by 1.02%, with Credit Agricole and Soc Gen seeing losses of 1.36% and 2.03% respectively.

It was also another bearish day for the auto sector. Peugeot slid by 5.23%, while Renault slipped by 0.47%.

Air France-KLM fell deeper into the red, with a 2.31% loss, while Airbus SE eked out a 0.56% gain.

On the VIX Index

It was back into the red for the VIX, which fell by 7.57% on Thursday. Reversing a 6.78% gain from Wednesday, the VIX ended the day at 32.6.

Bearish sentiment across the majors had seen the VIX spike at an early afternoon intraday high 39.3 before hitting reverse.

A rebound across the U.S majors late in the day came in spite of another dire jobless claims figures from the U.S.

Some positive updates on Thursday delivered the upside, which included news of rising demand for homes and a jump in crude oil prices.

The IEA’s monthly report delivered the boost for crude oil, with the IEA forecasting a 12m bpd fall in output to an almost decade low. The output forecast was accompanied by a positive outlook on demand that delivered the upside for crude on the day.

Across the U.S major indexes, the S&P500 rose by 1.15%, with the Dow and NASDAQ gaining 1.62% and 0.91% respectively.

The Day Ahead

It’s a busier busy day ahead on the Eurozone economic calendar. Key stats due out of the Eurozone include 1st quarter GDP numbers out of Germany.

We’ve seen the GDP numbers out of the Eurozone, France, and Spain. Germany’s figures are unlikely to give too much comfort as 2nd quarter indicators continue to paint a bleak picture.

March trade data and 2nd estimate GDP figures for the Eurozone, also due out, will likely have a muted impact on the day.

From the U.S, it’s also a busy day ahead and the numbers will garner some interest.

April retail sales and May’s NY Empire State Manufacturing and consumer sentiment figures are in focus.

Coupled with chatter from the Oval Office and Beijing, expect plenty of market reaction to the numbers.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 93,671 to 4,521,174. On Wednesday, the number of new cases had risen by 88,941. While the daily increase was higher than Wednesday’s rise, it was down from a 191,233 spike on the previous Thursday.

France, Germany, Italy, and Spain reported 4,230 new cases on Thursday, which was up from 3,225 new cases on Wednesday. On the previous Thursday, 16,103 new cases had been reported.

From the U.S, the total number of cases rose by 26,397 to 1,456,745 on Thursday. On Wednesday, the total number of cases had risen by 21,774. On Thursday, 7th May, the total new number of cases had risen by 56,348.

In the futures markets, at the time of writing, the DAX was up by 130 points, with the Dow up by 19 points.

This article was originally posted on FX Empire

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