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European Equities: Futures See Red as COVID-19 News and a Murky Outlook Weigh

Bob Mason

Economic Calendar:

Wednesday, 20th May

German PPI (MoM) (Apr)

Eurozone Core CPI (YoY) (Apr) Final

Eurozone CPI (MoM) (Apr) Final

Eurozone CPI (YoY) (Apr) Final

Eurozone Consumer Confidence Flash

Friday, 22nd May

French Manufacturing PMI (May) Prelim

French Services PMI (May) Prelim

German Manufacturing PMI (May) Prelim

German Services PMI (May) Prelim

Eurozone Manufacturing PMI (May) Prelim

Eurozone Markit Composite PMI (May) Prelim

Eurozone Services PMI (May) Prelim

The Majors

It was a mixed day for the European majors on Tuesday. The DAX30 rose by 0.15% to buck the trend, while the CAC40 and EuroStoxx600 fell by 0.89% and 0.61% respectively.

Sentiment towards the economy amidst the continued deluge of weak economic data weighed on the majors.

The downside came in spite of progress towards an EU recovery fund and the ongoing easing of lockdown measures.

While optimism continues to support the European majors, a likely slow economic recovery pinned the majors back. There were no catalysts to distract the markets from the harsh realities during the session.

Late in the European session, FED Chair Powell also delivered another reality check, stating that the U.S economy would unlikely recover until the end of 2021.

The Stats

It was a busier day on the Eurozone economic calendar on Tuesday. Key stats included May’s ZEW Economic Sentiment figures for Germany and the Eurozone.

Germany’s Economic Sentiment Index rose from 28.2 to 51.0 in May. In April, the Index had risen from -49.5 to 28.2. The ZEW Current Conditions Index fell from -91.5 to -93.5. In April, the index had fallen from -43.1 to -91.5.

For the Eurozone, the Economic Sentiment Index rose from 25.2 to 46.0 in May. In April, the Index had risen from -49.5 to 25.2.

An improved sentiment towards the economic outlook across economists and analysts provided little support early in the day, however.

From the U.S, economic data included April building permits and housing starts. The stats had a muted impact on the majors, however, with the focus being on FED Chair Powell’s testimony.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. Daimler and Volkswagen slid by 1.89% and by 1.43% to lead the way. BMW and Continental weren’t far behind, with losses of 1.08% and 0.97% respectively.

It was a mixed day for the banks, however. While Deutsche Bank fell by 0.37%, Commerzbank rose by a further 5.17% following Monday’s breakout.

Deutsche Lufthansa struggled on the day, with a 1.17% loss.

From the CAC, it was a bearish day for the banking sector on Tuesday. Soc Gen slid by 4.76%, with BNP Paribas and Credit Agricole ending the day with losses of 0.93% and 2.77% respectively.

It was a particularly bearish day for the auto sector, however. Peugeot fell by 5.62, with Renault tumbling by 10.85%.

A slump in EU car registrations in April weighed heavily on the auto sector.

Air France-KLM slid by 8.97% to reverse Monday’s 5.48% gain, while Airbus SE fell by just 2.01% following Monday’s 12.23% surge.

On the VIX Index

A run of 3rd consecutive days in the red came to an end on Tuesday, with the VIX rising by 4.20%. Partially reversing an 8.12% slide on Monday, the VIX ended the day at 30.5.

Following Monday’s COVID-19 vaccine breakout, there were a number of negatives for the U.S majors on Tuesday.

From Capitol Hill, Republicans in Congress stated that they were in no hurry to deliver another relief package. There was also some negative chatter on the COVID-19 vaccine Moderna. The news hit the wires that there was no way of knowing the effectiveness of the drug in its early trial stags. Coupled with some dire economic data and doom and gloom from the FED Chair, the U.S Indexes hit reverse late in the session.

On Tuesday, the S&P500 fell by 1.05%, with the Dow and NASDAQ seeing losses of 1.59% and 0.54% respectively.

The Day Ahead

It’s a busier day ahead on the Eurozone economic calendar. Key stats include finalized April inflation figures for the Eurozone and wholesale inflation figures for Germany.

Later in the session, the Eurozone’s flash consumer confidence figures will also garner some attention.

From the U.S, there are no material stats to consider ahead of the FOMC meeting minutes that are due for release after the European close.

On the geopolitical risk front, further updates from the EU on fiscal stimulus will provide direction along with the latest COVID-19 news and numbers.

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 94,819 to 4,982,937. On Monday, the number of new cases had risen by 82,564. The daily increase was higher than both Monday’s rise and 81,022 new cases from the previous Tuesday.

France, Germany, Italy, and Spain reported 2,848 new cases on Tuesday, which was up from 1,916 new cases on Monday. On the previous Tuesday, 4,176 new cases had been reported.

From the U.S, the total number of cases rose by 20,688 to 1,570,583 on Tuesday. On Monday, the total number of cases had risen by 22,231 On Tuesday, 12th May, a total of 22,740 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 22 points, while the Dow was up by 165 points.

This article was originally posted on FX Empire