The Weekly Wrap – Economic Data and COVID-19 Continued to Girate the Markets

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 10th July.

A total of just 30 stats were monitored, following the 74 stats from the week prior.

Of the 30 stats, 20 came in ahead forecasts, with 9 economic indicators coming up short of forecast. 1 stats were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 6, all 6 stats reflected a deterioration from previous.

For the Greenback, it was a 3rd consecutive week in the red. In the week ending 10th July, the Dollar Spot Index fell by 0.54% to 96.652. In the week prior, the Dollar had fallen by 0.27%.

COVID-19 updates drew greater focus, with a lighter economic calendar unable to distract the markets.

For the U.S, the daily COVID-19 numbers continued to spike to fresh highs in the week. At the end of the week, news of progress towards a successful treatment drug delivered riskier assets with support, however.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 12,604,895 for Friday, rising from last Friday’s 11,175,074 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,429,821 on a global basis. This was higher than the previous week’s increase of 1,290,881 in new cases.

In the U.S, the total rose by 399,290 to 3,285,550. In the week prior, the total number of new cases had risen by 338,384. An upward trend was evident throughout the week once more.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 7,406 to bring total infections to 743,215. In the previous week, the total number of new cases had risen by 6,464.

Out of the U.S

It was a relatively quiet week on the economic data front.

Key stats included June’s ISM Non-Manufacturing PMI, May’s JOLT’s job openings, and the weekly jobless claims.

The stats were skewed to the positive, with the U.S non-manufacturing sector expanding in June.

On the labor market front, JOLTs job openings increased from 4.996m to 5.397m. More importantly, the weekly initial jobless claims rose by 1.314m in the week ending 3rd July. This was down from 1.413m in the week prior.

While the stats were positive, COVID-19 updates from the U.S were particularly dire, providing the Greenback with some support.

In the equity markets, the NASDAQ rallied by 4.01%, with the Dow and S&P500 gaining 0.96% and 1.76% respectively.

Out of the UK

It was also a relatively quiet week on the economic calendar. June’s construction PMI, 1st quarter labor productivity, and house prices were in focus.

A sharp rebound in construction sector activity was positive, with the PMI jumping from 28.9 to 55.3.

House prices also bottomed out, with news of an adjustment to stamp duty thresholds also positive for the sector.

Ultimately, however, it was Brexit chatter that provided the Pound with support in the week.

Following the curtailed talks from the previous week, the EU hinted at a willingness to compromise, raising hopes of a deal.

In the week, the Pound rose by 1.11% to $1.2622, following a 1.19% gain in the previous week. The FTSE100 ended the week down by 1.01%, with a 1.73% slide on Thursday delivering the loss.

Out of the Eurozone

It was a relatively busy week economic data front, with Germany in focus.

Germany’s factory orders, industrial production and trade data for May were in focus in the week. On Friday, French and Italian production figures caught the market’s attention.

From Germany, the stats were skewed to the negative based on forecasts. Both factory orders and industrial production rose by less than forecast.

Germany’s trade balance came in ahead of forecasts, which provided some support.

Construction figures from Germany and the Eurozone’s retail sales figures for May had a muted impact in the week.

At the end of the week, industrial production figures from France and Italy delivered a boost.

For the week, the EUR rose by 0.46% to $1.1300, following a 0.26% gain from the previous week.

For the European major indexes, it was a mixed week. The CAC30 fell by 0.73%, while the DAX30 and EuroStoxx600 saw gains of 1.15% and 0.38% respectively.

For the Loonie

It was a relatively busy week on the economic calendar.

Key stats included June’s Ivey PMI, housing data, and the all-important employment figures for June.

The stats were skewed to the positive. The Ivey PMI jumped from 39.1 to 58.2 in June. More impressively, employment jumped by 952,900 following a 289,600 rise in May.

As a result of the jump in hiring, the unemployment rate fell from 13.7% to 12.3%.

While the stats were skewed to the positive, COVID-19 jitters and a negative monthly IEA report weighed.

The Loonie fell by 0.33% to end the week at C$1.3592 against the Greenback. In the week prior, the Loonie had risen by 0.27%.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 10th July, the Aussie Dollar rose by 0.16% to $0.6950, with the Kiwi Dollar rising by 0.66% to $0.6574.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar, with no material stats to provide direction.

While there were no stats, the RBA was in action on Tuesday, standing pat on monetary policy. This was in line with market expectations, limiting any major moves by the Aussie Dollar.

In the week, the government closed down the border between Victoria and New South Wales due to fresh new cases…The latest spread pinned the Aussie Dollar back in the week.

For the Kiwi Dollar

It was also a relatively quiet week on the economic data front.

Key stats were limited to 2nd quarter business confidence figures and June electronic card retail sales figures.

While both were Kiwi Dollar positive, there was nothing impressive to give the Kiwi a major boost.

For the Japanese Yen

It was a quiet week on the data front.

Household spending figures for May delivered more bad news early in the week. Year-on-year, household spending was down by 16.2%, following an 11.1% decline in April.

Month-on-month, spending fell by 0.1%, following a 6.2% slide in April. In contrast to other economies, consumers appeared unwilling to loosen the purse strings, which will be of concern for the government.

While the stats were negative, concerns over COVID-19 delivered the upside for the Yen in the week.

The Japanese Yen rose by 0.54% to end the week at ¥106.93 against the Greenback. In the week prior, the Yen had fallen by 0.27% against the U.S Dollar.

Out of China

It was a quiet week on the economic data front, with June inflation figures in focus.

The stats were skewed to the positive, though ultimately of little influence.

A lack of chatter from Washington and Beijing allowed the markets to move beyond the recent war of words.

Tensions over Hong Kong are unlikely to abate anytime soon, however. Positive sentiment towards an economic rebound in China drove demand for equities in the week.

News had also hit the wires in the early part of the week of a reported priority to foster a “healthy” bull market.

In the week ending 10th July, the Chinese Yuan rose by 0.95% to end the week at CNY6.9994 against the Greenback.

The CSI300 rallied by 7.55% in the week, with the Hang Seng gaining 1.40%.

European Equities: A Week in Review – 11/07/20

The Majors

It was a mixed week for the European majors in the week ending 10th July. Partially reversing a 1.99% gain from the previous week, the CAC40 fell by 0.73% to lead the way down.

The DAX30 and EuroStoxx600 reversed losses on Friday, however, to end the week with gains of 0.84% and 0.38% respectively.

It had been a bullish start to the week before the majors hit reverse.

Optimism over a swift economic recovery shifted to material concerns over a rising number of new COVID-19 cases in the U.S and beyond.

While the U.S administration remained adamant over a continued reopening of the country, the COVID-19 numbers suggested otherwise.

In the week, the WHO had also acknowledged that there was emerging evidence of airborne transmission of the coronavirus. A lack of social distancing and a continued reopening across the U.S in particular, coupled with airborne transmission sounded the alarm bells.

A bullish end to the week, however, came as the markets responded to industrial production figures from Italy and France.

The Stats

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

Key stats included May Factory orders, industrial production and trade data from Germany. While many economies had reported sharp rebounds from the dire numbers from April, Germany’s were less impressive.

Factory orders rose by 10.4%, partially reversing a 26.2% slump in April. Industrial production rose by just 7.8% following a 17.5% slide in April. Both sets of numbers fell short of forecasts to pin back the European majors.

Germany trade figures were positive later in the week but were not good enough to ease concerns over COVID-19.

German construction numbers for June and Eurozone retail sales figures for May had little influence in the week.

At the end of the week, industrial production figures from France and Italy provided much-needed support.

In Italy, industrial production surged by 42.1% in May, reversing a 20.5% slide from April. France reported a 19.6% jump in production, which reversed a 20.6% slide from April. The recoveries were far more impressive than Germany’s that had weighed on the majors earlier in the week.

From the U.S

The stats were skewed to the positive, with the markets preferred ISM Non-Manufacturing PMI jumping from 45.4 to 57.1.

JOLTs job openings for May were also positive, rising from 4.996m to 5.397m, with initial jobless claims rising by 1.314m. This was down from 1.413m in the week prior.

Ultimately, however, the positive stats had little influence mid-week. The rising number of COVID-19 cases across the U.S suggests a possible reversal of the recent improvement in economic indicators…

The Market Movers

From the DAX, it was a mixed week for the auto sector. BMW and Volkswagen led the way, with gains of 2.26% and 3.03% respectively. Continental and Daimler ended the week with losses of 1.59% and 0.16% respectively.

It was also a bullish week for the banking sector. Commerzbank jumped by 10.35%, with Deutsche Bank gaining 5.81%.

WIRECARD AG fell by 23.01%, partially reversing a 131.21% gain from the previous week.

From the CAC, it was a mixed week for the banks. BNP Paribas and Credit Agricole rose by 1.10% and 1.49% respectively, while Soc Gen fell by 0.85%.

The French auto sector also had a mixed week, with Peugeot falling by 1.75%, while Renault gained 0.54%

Air France-KLM and Airbus ended the week down by 4.39% and by 0.27% respectively.

On the VIX Index

It was a 4th consecutive week in the red for the VIX. In the week ending 10th July, the VIX fell by 1.41%. Following on from a 20.3% tumble from the previous week, the VIX ended the week at 27.29.

Economic data from the U.S managed to support gains for the U.S majors. The weekly gains across the U.S majors came in spite of the widespread spike in new COVID-19 cases.

At the end of the week, the Dow and S&P500 found strong support on news of progress towards a successful treatment drug.

The S&P500 ended the week up by 1.76%, with the Dow and NASDAQ gaining 0.96% and by 4.01% respectively.

The Week Ahead

It’s a quieter week on the Eurozone economic calendar. Key stats include July’s ZEW Economic Sentiment figures for Germany and the Eurozone.

The Eurozone’s industrial production and trade data for May should have a muted impact on the majors in the week.

There are also finalized inflation figures that will likely be brushed aside by the markets.

On Thursday, expect the ECB’s monetary policy decision to be the main event of the week. There has been some recent discord within the ranks. This will make the ECB press conference all the more interesting…

From elsewhere

Economic data out of China, which includes 2nd quarter GDP figures, will garner plenty of attention in the week. There has been plenty of optimism over a sharp economic rebound in China. The proof will be in the pudding…

If that’s not enough, there are also trade data and industrial production and fixed asset investment figures for June to consider…

From the U.S, June retail sales and industrial production figures, together with July manufacturing sector PMIs will provide direction.

Away from the Economic Calendar

COVID-19 numbers and related news in the week will also have a material impact on the majors. If the situation worsens, expect risk appetite to wane. While news late in the week of successful treatment was positive, the latest spread does continue to jeopardize a swift economic recovery.

And, if that’s not enough, earnings season kicks off this coming week…

European Equities: COVID-19 and Geopolitics in Focus

The Majors

It was a 3rd consecutive day in the red for the European majors on Thursday. The CAC40 fell by 1.21%, with the DAX30 and EuroStoxx600 declining by 0.04% and 0.77% respectively.

Rising COVID-19 cases across the U.S continued to weigh on demand for riskier assets.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Germany’s trade data for May were in focus ahead of the European open.

According to Destatis, Germany’s trade surplus widened from €3.4bn to 7.6bn in May. Economists had forecast a widening to €5.2bn.

  • Exports increased by 9.0% in May, partially reversing a 24% slump in April. Economists had forecast a 13.8% rise.
  • Imports rose by 3.5%, following a 16.6% slide in April. Economists had forecast a 12% rise.

Compared with May 2019

  • Germany exported goods to the value of €42.4bn (-29.0%) to EU member states.
  • Exports to Eurozone member states fell by 29.1% to €29.9bn.
  • Germany exported goods to the value of €37.7bn (-30.5%) to countries outside of the EU.
  • Germany imported goods to the value of €38.4bn (-25.2%) from EU member states.
  • Imports from Eurozone member states fell by 25.2% to €26.7bn.
  • Germany’s imports from non-EU countries fell by 17.5% to €34.8bn.

From the U.S

The all-important weekly jobless claims figures were in focus late in the European session. In the week ending 3rd July, initial jobless claims rose by 1.314m. While this was better than a forecasted 1.375m and previous week 1.413m, it was still sizeable.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Continental and Daimler fell by 1.31% and by 2.73% to lead the way down. BMW and Volkswagen saw more modest losses of 0.74% and 0.09% respectively.

It was also a bearish day for the banks. Deutsche Bank fell by 1.99%, with Commerzbank sliding by 4.42%.

WIRECARD AG led the way down with a 9.19% slide coming off the back of a 15.53% tumble from Wednesday.

From the CAC, it was another bearish day for the banks. Soc Gen slid by 3.57%, with BNP Paribas and Credit Agricole falling by 2.31% and 2.33% respectively.

The French auto sector saw yet more losses, with Peugeot and Renault declining by 2.28% and by 1.91% respectively.

Things were no better for Air France-KLM and Airbus SE which fell by 2.26% and by 3.96% respectively.

On the VIX Index

It was back into the green for the VIX on Thursday. Following a 4.59% fall from Wednesday, the VIX rose by 4.20% to end the day at 29.26.

COVID-19 did the damage on Thursday, which overshadowed the better than expected jobless claims figures.

The S&P500 and Dow fell by 0.56% and by 1.39% respectively, while the NASDAQ rose by 0.53%.

VIX 10/07/20 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the European majors with direction.

A lack of stats will leave the majors in the hands of geopolitics and COVID-19 at the end of the week.

On Thursday, this optimism had wavered as new COVID-19 cases continued to rise across the U.S. A similar trend from Thursday will be another test for the bulls.

From the U.S

It’s also a relatively quiet day on the economic calendar, with wholesale inflation figures for June due out later today.

We don’t expect the figures to have any influence on the majors on the day, however.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 213,647 to 12,376,273. On Wednesday, the number of new cases had risen by 222,368. The daily increase was lower than Wednesday’s rise while higher than 190,716 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,190 new cases on Thursday, which was up from 986 new cases on Wednesday. On the previous Thursday, 1,027 new cases had been reported.

From the U.S, the total number of cases rose by 59,638 to 3,218,570 on Thursday. On Wednesday, the total number of cases had increased by 62,416. On Thursday, 2nd July, a total of 48,853 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the Dow was up by 117 points.

For a look at all of today’s economic events, check out our economic calendar.

Europe Set to Rebound, US Jobs Data on Radar

Traders in this part of the world continue to monitor the situation in the US, where the majority of states continue to see the number of new Covid-19 cases increase. As of yesterday, the number of confirmed cases in the US exceeded 3 million. On Tuesday, the WHO cautioned there could be an increase in the fatality rate as there has been a rise in infections, but the death rate so far has lagged.

US-China tensions were doing the rounds yesterday. The decision by the Chinese government to introduce the national security law in regards to Hong Kong has sparked criticism from many countries around the world as it chips away at the principal of ‘one country two systems’.

Yesterday there was speculation the US government would hit back at Beijing by potentially undermining the Hong Kong Dollar (HKD) peg. It wasn’t that long ago that President Trump reiterated that the US-China trade deal was intact, so going after the HKD might be a useful tactic. The US leader might be hesitant about taking a very tough stance against the Beijing administration given that he’s not doing well in the polls and the Presidential election is in November.

The mini-budget from Rishi Sunak, the UK’s Chancellor of the Exchequer, made big political headlines yesterday, but it didn’t have a significant impact on the markets. Mr Sunak revealed £30 billion worth of schemes that are aimed at providing assistance to the UK economy. The furlough scheme will come to an end in October and £9 billion will be allocated to job retention. There will be a temporary cut to VAT for the tourism and hospitality sector.

In addition to that, there have been incentives offered for dining out too – the combined stimulus is worth £4.5 billion. Providing help to the battered hospitality sector is a sensible move, but people in the UK might be cautious about socialising given what has happened in places like Melbourne and the US in relation to a rise in new cases. As expected, the stamp duty threshold was upped to £500,000 from £125,000. One could argue that this tactic might not be as fruitful as the government are hoping as some people are likely to be cautious about purchasing a property on account of the huge economic uncertainty.

The health crisis in the US remained in focus. Oklahoma, California and Tennessee all posted a record daily rise in the number of new cases. States like Florida and Arizona continue to see higher case numbers too. Despite the pandemic, US equity benchmarks closed higher as the tech sector continued its bullish run. Amazon, Apple and Netflix all set new record highs. Raphael Bostic, the head of the Federal Reserve of Atlanta, said that some of the fiscal support programmes might need to be extended.

Overnight, China posted its CPI data for June and the level was 2.5%, while economists were expecting 2.5%. Keep in mind the May reading was 2.4%. The PPI metric was -3%, and the consensus estimate was -3.2%, while the previous update was -3.7%. The improvement in the PPI rate might bring about higher CPI in the months ahead. Stocks in Asia are up on the session, and European markets are being called higher too.

The US dollar came under pressure yesterday. It was a quiet day in terms of economic data so the move wasn’t influenced by economic indicators. Lately the greenback has been a popular safe haven for traders, it was showing losses during the day when European indices were in the red, and when US stocks were flickering between positive and negative territory.

Gold was given a hand by the slide in the US dollar. The metal topped $1,800, and it was the first time since September 2011 that it traded above that mark. The commodity is still popular with certain traders as there are concerns that a second wave of Covid-19 could be on the cards. The metal’s positive move is being partly fuelled by the belief that central banks will maintain very loose monetary policy. Some people are afraid an inflation rise is in the pipeline, so that is influencing gold too.

At 7am (UK time) Germany will post its trade data for May, and the imports and exports are tipped to be 12% and 13.8% respectively.

The US initial jobless claims is anticipated to fall from 1.42 million to 1.37 million. The metric has fallen for the past 13 weeks in a row. The continuing claims reading is tipped to drop from 19.29 million to 18.95 million. Keep in mind that last week’s reading actually ticked up. The reports will be posted at 1.30pm (UK time).

A eurogroup video conference meeting will be held today and traders will be listening out for any potential progress being made in relation to the region’s recovery fund.

EUR/USD – since early May it has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1042, the 200 day moving average, to be targeted.

GBP/USD – since late June it has been in an uptrend, and should the positive move continue, it might target 1.2687, the 200-day moving average. A move through that level should put 1.2812 on the radar. A drop below 1.2251, might bring 1.2076 into play.

EUR/GBP – Tuesday’s daily candle has the potential to be a bearish reversal, and if it moves lower it might find support at 0.8935, the 50-day moving average. A retaking of 0.9067 could see it target 0.9239.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.37, the 200-day moving average.

FTSE 100 is expected to open 34 points higher at 6,190

DAX 30 is expected to open 153 points higher at 12,647

CAC 40 is expected to open 46 points higher at 5,027

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

European Equities: Economic Data and COVID-19 to Test the Majors

Economic Calendar:

Thursday, 9th July

German Trade Balance (May)

The Majors

It was another bearish for the European majors on Wednesday, with no stats or positive news to shift the mood from Tuesday. The CAC40 fell by 1.24%, with the DAX30 and EuroStoxx600 declining by 0.97% and 0.67% respectively.

Rising COVID-19 cases across the U.S drew more attention than normal, as the number of cases rose to beyond 3m.

Reuters also published an article reporting that the WHO acknowledged “evidence emerging” of the airborne spread of the virus.

The accelerating spread of the virus brings into question the market’s optimistic outlook on economic recovery. All of this before earnings season kicks in next week…

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday. There were no material stats to provide the European majors with direction.

From the U.S

It was also quiet through the U.S session, with no major stats from the U.S to shift sentiment late in the day.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Wednesday. Continental slid by 2.54% to lead the way down. Daimler and Volkswagen saw more modest losses of 0.52% and 0.86% respectively, while BMW bucked the trend, with a 0.41% gain.

It was also another mixed day for the banks. Deutsche Bank rose by 0.89%, while Commerzbank slipped by 0.94%.

WIRECARD AG slid by 15.53% to partially reverse a 32.51% gain from Tuesday.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 2.39% and 2.23% to lead the way down. Credit Agricole ended the day with a 1.42% loss.

The French auto sector struggled after a bullish start to the week. Peugeot and Renault slid by 4.20% and by 4.61% respectively.

Air France-KLM and Airbus SE fell by 2.21% and by 2.18% respectively, following on from a pullback on Tuesday.

On the VIX Index

A run of 2 consecutive days in the green came to an end for the VIX on Wednesday. Partially reversing a 5.33% gain from Tuesday, the VIX fell by 4.59% to end the day at 28.08.

After a bearish start to the day, the major U.S indexes bounced back to wrap up the day in positive territory.

Hope overshadowed the dire COVID-19 numbers from the U.S on the day, with no economic data to influence. Tech stocks led the way, delivering the NASDAQ with a solid gain on the day.

The S&P500 rose by 0.78%, with the Dow and NASDAQ ended the day with gains of 0.68% and 1.44% respectively.

VIX 09/07/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. May’s trade figures for Germany are due out later this morning.

We won’t expect too much influence from the numbers, however, which are now dated.

With the stats unlikely to garner too much attention, expect updates on Brexit and COVID-19 news to remain key drivers.

From the U.S

It’s also a relatively quiet day on the economic calendar, though we do expect the weekly jobless claims to influence.

Following a record jump in nonfarm payrolls in June, we have yet to see the weekly claims fall back to sub-1m levels.

With a number of the most populous U.S states hitting pause on reopening, this week’s figures could be alarming…

Anything under 1m initial jobless claims and the markets may breathe a sigh of relief.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 222,368 to 12,130,571. On Tuesday, the number of new cases had risen by 227,176. The daily increase was lower than Tuesday’s rise while higher than 210,499 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 986 new cases on Wednesday, which was up from 776 new cases on Tuesday. On the previous Wednesday, 1,062 new cases had been reported.

From the U.S, the total number of cases rose by 62,416 to 3,162,416 on Wednesday. On Tuesday, the total number of cases had increased by 67,655. On Wednesday, 1st July, a total of 51,607 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 127 points, while the Dow was down by 28 points.

For a look at all of today’s economic events, check out our economic calendar.

Health Woes Linger, Rishi Sunak in Focus

The bullish move that was seen at the start of the week was triggered by an editorial in the China Securities Journal. The article talked about the possibility of a bullish run in Chinese equities, and in turn there was a surge in domestic stocks, and that paved the way for the upward move in world stock markets on Monday.

One could argue the rally was essentially manufactured by the article in question, hence why the feel good factor didn’t last too long. By the close of play yesterday, the FTSE 100, DAX 30 and the CAC 40 had handed back nearly all the gains that were made on Monday. Yesterday’s move was more about a correction rather than a sharp change in outlook.

US indices got off to a less volatile start yesterday. The tech sector continued to be popular and it helped the S&P 500 turn positive in early trading. Stocks such as Apple, Facebook, Amazon and Netflix all posted record highs, and in turn the NASDAQ 100 set a new all-time high. The bullish move ran out of steam and the S&P 500 and the NASDAQ 100 closed down 1.08% and 0.75% respectively. Raphael Bostic, the head of the Atlanta Federal Reserve Bank cautioned the rebound in the US economy might be levelling off.

Equity markets in Asia are mixed as stocks in China and Hong Kong are showing modest gains, while the Nikkei 225 is in the red. The WHO said it wouldn’t be surprised if the death rate started to rise as Covid-19 cases increased in June.

Rishi Sunak, the Chancellor of the Exchequer, will be in focus today as his is tipped to unveil various schemes that are aimed at aiding the economy. Some of the programmes have already been announced. Last week, Prime Minister Johnson, revealed a £5 billion infrastructure plan.

There is talk about more funds being allocated to schools too. It is believed that £3 billion will be earmarked for a green investment package – which will include energy efficiency schemes and the creation of jobs. The house building sector could be in for a boost as there is talk the stamp duty threshold will be raised from £125,000 to £500,000. Changes might be introduced to the furlough scheme and VAT might be alerted too.

The European Commission (EC) downgraded its outlook for the EU and the eurozone. The group revised its forecasts because its felt European countries reopened their economies at a slower rate than initially predicted. The EC is now forecasting the EU and the currency area will contract by 8.3% and 8.7% respectively in 2020, while the previous forecasts were -7.4% and -7.7%.

The scale of the revision isn’t huge, but a negative revision is important from a psychological point of view. The news from the EC echoed that of the IMF, who in June predicted the global economy would shrink by 4.9% this year, while their previous prediction was -3%. The IMF are very bearish on the eurozone as they feel it will contract by 10.2% in 2020.

The CMC GBP index rallied yesterday as the UK’s and the EU’s chief negotiators had dinner at Downing Street. Britain’s David Frost entertained Michel Barnier and no doubt the conversation included topics such as trade and fishing rights. Sterling pushed higher during the day as dealers took the view that some progress should be made. The UK and the EU have both expressed a desire to strike a deal, but differences remain.

At 3.30pm (UK time) the EIA report will be posted and US oil stockpiles are tipped to fall by 3.2 million barrels, while gasoline inventories are anticipated to remain unchanged.

EUR/USD – since early May it has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1042, the 200 day moving average, to be targeted.

GBP/USD – since late June it has been in an uptrend, and should the positive move continue, it might target 1.2686, the 200-day moving average. A move through that level should put 1.2812 on the radar. A drop below 1.2251, might bring 1.2076 into play.

EUR/GBP – yesterday’s daily candle has the potential to be a bearish reversal, and if it moves lower it might find support at 0.8930, the 50-day moving average. A retaking of 0.9067 could see it target 0.9239.

USD/JPY – has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.38, the 200-day moving average.

FTSE 100 is expected to open 34 points lower at 6,155

DAX 30 is expected to open 46 points lower at 12,570

CAC 40 is expected to open 25 points lower at 5,018

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

European Equities: DAX Set to Open in the Red, with No Stats to Provide Direction

Economic Calendar:

Thursday, 9th July

German Trade Balance (May)

The Majors

It was a bearish day for the European majors on Tuesday. The DAX30 fell by 0.92%, with the CAC40 and EuroStoxx600 seeing losses of 0.74% and 0.61% respectively.

Following the bullish sentiment on Monday, some caution hit the markets as summer economic forecasts rolled out.

On Tuesday, the European Commission projected an 8.7% contraction for 2020 followed by 6.1% growth in 2021. For the markets, the 1 percentage point downward revision will have been of concern when considering both fiscal and monetary policy support.

A continued rise in new coronavirus cases will also not have helped the majors on the day.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Tuesday. Key stats included Germany’s industrial production figures for May.

According to Destatis,

  • Industrial production increased by 7.8% in May, partially reversing a 17.5% slide from April.
  • Production in industry excluding energy and construction was up by 10.3%.
    • Within industry, the production of intermediate goods showed a 0.1% decrease.
    • The production of consumer goods increased by 1.4%, while the production of capital goods jumped by 27.6%.
  • Outside industry, energy production was up by 1.7%, with the production of construction up by 0.5%.

From the U.S

It was also a relatively quiet day on the economic calendar, with May’s JOLTs job openings in focus.

In May, job openings rose from 4.996m to 5.397m. Economists had forecast a fall to 4.85m.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Tuesday. Continental and Volkswagen slid by 1.00% and by 1.16% to lead the way down. Daimler fell by a more modest 0.20%, while BMW bucked the trend, with a 0.12% gain.

It was also a mixed day for the banks. Deutsche Bank fell by 0.68%, while Commerzbank rallied by 3.56% following on from Monday’s 4.26% gain.

WIRECARD AG rallied by 32.51% to reverse Monday’s 25.55% tumble.

From the CAC, it was a bearish day for the banks. Soc Gen fell by 1.26% to lead the way down. BNP Paribas and Credit Agricole saw more modest losses of 0.28% and 0.25% respectively.

The French auto sector saw further gains on Tuesday. Peugeot and Renault rose by 0.34% and by 0.54% respectively.

Air France-KLM and Airbus SE fell by 1.17% and by 0.59% respectively.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Tuesday. Following on from a 0.94% gain on Monday, the VIX rose by 5.33% to end the day at 29.43.

A pullback across the major U.S equity markets came on Tuesday as investors turned cautious ahead of a busy week next week. With economic data limited to JOLTs job openings, some profit-taking weighed ahead of earnings season.

A continued rise in new coronavirus cases across the U.S will have also weighed on risk appetite on the day.

The S&P500 fell by 1.08%, with the Dow and NASDAQ ended the day down by 1.17% and 0.86% respectively.

VIX 08/07/20 Daily Chart

The Day Ahead

It’s a quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the majors with direction.

A lack of stats will leave the majors in the hands of the news wires and COVID-19 numbers. Following the 2nd quarter rebound in the majors and a positive start to July, the markets may remain relatively cautious.

Plenty of downside risks remain that could hit the majors, including a widespread reintroduction of lockdown measures. There are also rising tensions with a number of G7 countries and China to also consider…

From the U.S

There are no material stats due out later today. This will likely give the weekly crude oil inventory numbers, COVID-19, and geopolitics greater airtime.

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 227,176 to 11,940,258. On Monday, the number of new cases had risen by 177,554. The daily increase was higher than Monday’s rise and 201,507 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 776 new cases on Tuesday, which was down from 1,876 new cases on Monday. On the previous Tuesday, 934 new cases had been reported.

From the U.S, the total number of cases rose by 67,655 to 3,096,516 on Tuesday. On Monday, the total number of cases had increased by 45,706. On Tuesday, 30th June, a total of 53,471 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was down by 14.5 points, while the Dow was up by 124 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Can the Majors Continue to Defy Gravity? Plenty Can Go Wrong…

Economic Calendar:

Tuesday, 7th July

German Industrial Production (MoM) (May)

Wednesday, 8th July

EU Economic Forecasts

Thursday, 9th July

German Trade Balance (May)

The Majors

It was a bullish start to the week for the European majors, with the bullish chatter across China’s state-controlled media driving risk appetite early on.

The DAX30 rose by 1.64%, with the CAC40 and EuroStoxx600 seeing gains of 1.49% and 1.58% respectively.

News had hit the wires in the early part of the day of a reported priority to foster a “healthy” bull market.

The news allowed the markets to once more cast aside negative COVID-19 news to deliver support for riskier assets. Even rising tension between the U.S and China over the last week was not enough to pin back risk appetite.

Economic data certainly contributed to the upside on the day, with stats from the Eurozone and the U.S impressing.

From last week, news of the conditional approval for the use of antiviral drug remdesivir in the EU was also taken as positive by the markets. The approval came ahead of a record-high number of COVID-19 cases from the weekend.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Monday. Key stats included Germany’s factory orders and the Eurozone’s retail sales figures for May. From Germany, June’s construction PMI was also in focus.

According to Destatis, factory orders rose by 10.4% in May, partially reversing a revised 26.2% tumble in April. Economists had forecast a 15% rise.

  • Domestic orders increased by 12.3% and foreign orders by 8.8%, month-on-month.
  • New orders from the euro area went up 20.9%, with new orders from other countries increasing by 2.0%.
  • Manufacturers of intermediate goods saw new orders increase by 0.4%, with manufacturers of capital goods seeing an increase of 20.3%.
  • Consumer goods new orders increased by 4.7%.
  • New orders in the automotive industry saw a marked increase, though remained more than 47% lower than in February 2020.

In June, Germany’s Construction PMI rose from 40.1 to 41.3 in June.

From the Eurozone, retail sales jumped by 17.8% in May, coming in ahead of a forecasted 15% increase. In April, retail sales had slumped by 12.1%.

According to Eurostat,

  • The volume of retail trade increased by 38.4% for automotive fuels, by 34.5% for non-food products, and by 2.2% for food, drinks, and tobacco.
  • Luxembourg (+28.6%), France (+25.6%), and Austria (+23.3%) registered the largest increases in May.

From the U.S

It was a relatively busy day on the economic calendar, with June’s ISM Non-Manufacturing PMI in focus.

According to the latest ISM Survey, the June PMI jumped from 45.4 to 57.1, coming in well ahead of a forecasted 50.1.

The pace of job losses eased in June, with the Employment PMI rising from 31.8 to 43.1.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. Daimler and Volkswagen each saw gains of 2.13% to lead the way. BMW and Continental rose by 1.20% and 1.49% respectively.

It was a particularly bullish day for the banks. Deutsche Bank and Commerzbank rallied by 4.26% and by 7.49% respectively.

WIRECARD AG bucked the trend, following Friday’s 13.33% gain, with a 25.55% slide on the day.

From the CAC, it was also a bullish day for the banks. Soc Gen rallied by 3.96% to lead the way. BNP Paribas and Credit Agricole saw gains of 3.05% and 2.80% respectively.

The French auto sector also saw green on Monday. Peugeot and Renault rose by 2.87% and by 4.40% respectively.

Air France-KLM bucked the trend on the day, falling by 0.07%, while Airbus SE rose by 3.18%.

On the VIX Index

A run of 4 consecutive days in the red came to an end for the VIX on Monday. Partially reversing a 3.28% fall from Thursday, the VIX ended the day at 27.94. (The U.S markets were closed on Friday).

In spite of a broad-based market equity market rally, the VIX found support from the record number of new COVID-19 cases from the weekend.

The S&P500 rose by 1.59%, while the Dow and NASDAQ ended the day with gains of 1.78% and 2.21% respectively.

VIX 07/07/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats include German industrial production figures for May.

Barring particularly dire numbers, we would expect the stats to have a muted impact on the majors. We can expect June’s figures to have far greater impact…

From the U.S

May’s JOLTs job openings are due out later today. With plenty of focus on labor market conditions, expect the numbers to influence late in the session.

Geopolitics

On the geopolitical risk front, there is still plenty to catch the markets off-guard, with U.S and China tensions elevated.

A continued rise in new COVID-19 cases will also test market risk sentiment. Much will depend on whether there is a continued shift in stance on reopening the economies across the EU and the U.S, however.

At present, central bank support and optimism of a swift economic recovery continue to push the majors northwards.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 177,554 to 11,713,082. On Sunday, the number of new cases had risen by 156,610. The daily increase was higher than Sunday’s rise and 153,341 new cases from the previous Monday.

Germany, Italy, and Spain reported 1,876 new cases on Monday, which was up from 407 new cases on Sunday. On the previous Monday, 803 new cases had been reported. Notably, Spain reported 1,244 new cases on Monday. This was the highest since 22nd May and follows news of a lockdown within the Catalonia region.

From the U.S, the total number of cases rose by 45,706 to 3,028,861 on Monday. On Sunday, the total number of cases had increased by 47,385. On Monday, 29th June, a total of 41,940 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 52 points, with the Dow up by 71 points.

For a look at all of today’s economic events, check out our economic calendar.

Rally in Asia Bodes Well for Europe

The 4 July holiday in the US fell on a Saturday this year, so it was a public holiday on Friday and the US market was closed.

Volatility was low in the first hours of the European trading session, and trading volumes were down sharply when compared with the rest of the week. Health woes chipped away at market sentiment on this side of the Atlantic. On Friday, it was revealed that US states such as Arizona and California saw a jump in the number of new cases. It is likely that traders in Europe took the view the health situation in the US would deteriorate as Americans enjoyed their long weekend.

According to the WHO, on 4 July over 212,000 new Covid-19 cases were registered – a daily record. The US, Brazil and India were the largest contributors to the tally. The US’s reading on Saturday was over 53,000, which was a retreat from Friday’s level of more than 57,000. Some hard hit US states such as Florida are experiencing a drop-off in the rate of new cases, which is probably down to a pausing of the reopening of its economy. As of yesterday, 34 states saw an increase in new cases on the week.

Stocks in mainland China and Hong Kong are showing impressive gains. There has been a jump in trading volumes in China, and European equity benchmarks are tipped to open higher as a result.

The latest services data from China and Europe point to a continuation in the rebound in activity. The Caixin survey of Chinese services for June was 58.4, its highest in ten years. Keep in mind the February reading was 26.5, so there has been a colossal turnaround. The services PMI reports for Spain, Italy, France, Germany and the UK were 50.2, 46.4, 50.7, 47.3, and 47.1 respectively.

The Spanish and French updates showed positive growth, and all the readings were major improvements on the May levels – which were in the high 20s or low 30s. It is clear that things are improving from an economic point of view, but the health situation could be a different story. There have been local lockdowns in Leicester, Melbourne, and in parts of Spain too. There are concerns that this sort of thing could become common.

Christine Lagarde, the European Central Bank president, warned that prices in the currency bloc might remain under pressure for the next two years, before seeing a turnaround. The central banker took part in a webinar on Saturday, and predicted that digitalisation will speed up, and that companies will cut their supply chains too.

It was reported the Bank of England chief, Andrew Bailey, wrote to UK banks and said that negative interest rates are an option the group is considering. Such a move would put pressure on lending margins, which are already squeezed. Interest rates are at historic lows, but consumers are actually paying down credit card debt, so would negative rates actually spark higher demand?

Over the weekend, pubs and restaurants in England were allowed to reopen. The event was referred to as ‘Super Saturday’ and it was a continuation of life returning to normal. The UK economy has come a long way in the past few months, and with more businesses reopening the economic rebound should continue, but there are concerns the infection rate could jump. Images of packed streets in places like London’s Soho will probably add weight to the argument that the capital could be in for a rise in Covid-19 cases.

German factory orders will be posted at 7am (UK time) and the May reading is expected to be 15%, and that would be massive rebound from the -25.8% registered in April.

The UK construction PMI report for June is expected to be 47, up from 28.9 in May. It will be announced at 9.30am (UK time).

At 10am (UK time), eurozone retail sales will be released and the consensus estimate is 15%. Keep in mind the May reading was -11.7%.

The final reading of US services PMI for June is expected to be 47, and that would be a slight improvement from the flash report’s 46.6. The report will be published at 2.45pm (UK time). Shortly afterwards, the ISM non-manufacturing report will be announced, and economists are predicting 50, which would be an improvement on the 45.4 registered in May.

EUR/USD

Since early May the EUR/USD has been in an uptrend, but it has been trading sideways recently. If it holds above the 1.1168 zone, it could target 1.1495. A break below the 1.1168 area might pave the way for 1.1038, the 200 day moving average, to be targeted.

GBP/USD

For more than three weeks the GBP/USD has been in a downtrend and if the bearish move continues, it might hit 1.2163. A move higher from here might see it target 1.2683, the 200-day moving average.

EUR/GBP

Has been in an uptrend for over two months and if it holds above 0.9000, it might target 0.9239. A move lower might find support at 0.8924, the 50-day moving average.

USD/JPY

Has been drifting lower for the last month and support could come into play at 106.00. A rebound might run into resistance at 108.38, the 200-day moving average.

FTSE 100 is expected to open 73 points higher at 6,230

DAX 30 is expected to open 244 points higher at 12,772

CAC 40 is expected to open 90 points higher at 5,097

For a look at all of today’s economic events, check out our economic calendar.

By David Madden (Market Analyst at CMC Markets UK)

European Equities: Stats, Geopolitics, and COVID-19 to Drive the Majors

Economic Calendar:

Monday, 6th July

German Factory Orders (MoM) (May)

Eurozone IHS Markit Construction PMI (Jun)

Eurozone Retail Sales (MoM) (May)

Tuesday, 7th July

German Industrial Production (MoM) (May)

Wednesday, 8th July

EU Economic Forecasts

Thursday, 9th July

German Trade Balance (May)

The Majors

It was a bearish end to a bullish week for the European majors on Friday. With the U.S markets closed, market angst over COVID-19 resurfaced as news of new spikes hit the news wires.

The CAC40 fell by 0.84%, with the DAX30 and EuroStoxx600 ending the day with losses of 0.64% and 0.78% respectively.

Ahead of the European open, positive economic data from China and the region had delivered support to riskier assets.

Over the course of the European session, there was also negative chatter on policy and politics.

Adding to the negative sentiment on the day was news of disagreement amongst policymakers over the weighting of the ECB’s emergency bond-purchase program.

Political issues also resurfaced in France, with French President Macron asking for his government’s resignation. Macron named Jean Castex as his new prime minister in a bid to build voter support.

The Stats

It was a busy day on the Eurozone economic calendar on Friday. Key stats included June’s service sector PMIs from Italy and Spain. Finalized services and composite PMIs from France, Germany, and the Eurozone were also in focus.

Spain’s services PMI jumped from 27.9 to 50.2, with Italy’s PMI rising from 28.9 to 46.4.

Germany’s finalized PMI came in at 47.3, which was up from a prelim 45.8 and May 32.6.

From France, the services PMI came in at 50.7, revised up from a prelim 50.3 and up from 31.1 in May.

The Eurozone’s services PMI came in at 48.3, which was revised up from a prelim 47.3 and May 30.5.

Upward revisions and positive numbers from Italy and Spain supported a rise in the Eurozone’s composite from 31.9 to 48.5. This was also up from a prelim 47.5.

From the U.S

There were no stats from the U.S, with the U.S markets closed on Friday.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. BMW and Daimler rose by 1.19% and by 1.01% respectively. Continental and Volkswagen hit reverse, however, ending the day with losses of 1.01% and 0.69% respectively.

It was a bearish day for the banks. Deutsche Bank fell by 0.61%, with Commerzbank ending the day down by 0.05%.

WIRECARD AG found much-needed support after a 32.14% slide on Thursday. On Friday, WIRECARD AG gained 13.33%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 0.89% and by 1.54% to lead the way down. Credit Agricole saw a more modest 0.39% loss.

The French auto sector also saw red on Friday. Peugeot and Renault declined by 2.29% and by 1.37% respectively.

Air France-KLM bucked the trend on the day, rising by 1.03%, while Airbus SE fell by 1.17%.

On the VIX Index

The U.S markets were closed on Friday.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include German factory orders and Eurozone retail sales figures for May. Germany’s Construction PMI for June is also due out.

Barring particularly dire numbers, we would expect the stats to have a muted impact on the majors. We can expect June’s factory orders and retail sales figures to have a far greater impact next month…

From the U.S

The market’s preferred ISM Non-Manufacturing PMI will influence later in the day. In reality, however, the continued rise in new COVID-19 cases may raise the prospects of further lockdowns. Such an eventuality would mute the effect of positive economic data enjoyed by the markets in recent weeks.

Geopolitics

On the geopolitical risk front, there is also a marked increase in tension between the U.S and China to consider on the day.

A lack of chatter over the weekend and a pullback in the number of new COVID-19 cases on Sunday were positives, however.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 156,610 to 11,535,528. On Saturday, the number of new cases had risen by 393,825. The daily increase was lower than Saturday’s rise while up from 136,417 new cases from the previous Sunday.

Germany, Italy, and Spain reported 322 new cases on Sunday, which was down from 1,612 new cases on Saturday. On the previous Sunday, just 650 new cases had been reported.

From the U.S, the total number of cases rose by 40,401 to 2,976,171 on Sunday. On Saturday, the total number of cases had surged by 107,457. On Sunday, 28th June, a total of 35,905 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 253.5 points, with the Dow up by 226 points.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – COVID-19 and Geopolitics Are in Focus along with Stats and the RBA

On the Macro

It’s a quiet week ahead on the economic calendar, with just 30 stats in focus in the week ending 10th July. In the week prior, 74 stats had also been in focus.

For the Dollar:

It’s a particularly quiet week ahead on the economic data front though not without some key stats to consider.

On Monday, the markets preferred and highly influential ISM Non-Manufacturing PMI for June is due out.

As the markets monitor labor market conditions, May’s JOLTs job openings on Tuesday will also draw attention.

The focus will then shift to the weekly jobless claims on Thursday. A pause in reopening across the most populous states of the U.S will not help bring the numbers back down to palatable levels…

At the end of the week, wholesale inflation figures for June will likely have a muted impact on the markets…

The Dollar Spot Index ended the week down by 0.27% to 97.172.

For the EUR:

It’s a relatively quiet week ahead on the economic data front.

Germany is in focus throughout the week. Key stats include May’s factory orders, industrial production, and trade figures.

We would expect factory orders and industrial production to have the greatest influence. These are figures from May, however, that should limit any material impact on the EUR.

From the Eurozone, retail sales figures on Monday will likely have a muted impact on the EUR.

Consumer spending and a bounce back in service sector activity remain key to a swift economic recovery. Following last week’s member state numbers, however, there shouldn’t be too many surprises.

From the EU, economic forecasts are due out on Wednesday that will garner plenty of attention. With the recent uptick in private sector activity and bounce back in consumption, the markets will want some better forecasts…

The EUR/USD ended the week up by 0.26% to $1.1248.

For the Pound:

It’s a quiet week ahead on the economic calendar.

Key stats include June’s construction PMI, 1st quarter labor productivity numbers, and house price figures.

Don’t expect the stats to have any material influence on the Pound, however.

Brexit chatter will likely be the key driver in the week. The EU and Britain continue to fail to find common ground.

Market risk sentiment will also be key, with any jump in COVID-19 numbers Pound negative.

The GBP/USD ended the week up by 1.19% to $1.2483.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

On Monday, June’s Ivey PMI is due out on Monday, with June employment figures due out on Friday.

While the Ivey PMI will influence, expect the employment figures to have the final say in the week.

Mid-week, housing starts, and building permit numbers will have a muted impact on the Loonie.

At the start of the week, the BoC will release its Business Outlook Survey that will influence the Loonie. Sentiment will need to materially improve to support a more optimistic economic outlook.

Away from the calendar, COVID-19 updates and any chatter about trade tariffs will also provide direction.

The Loonie ended the week up by 1.03% to C$1.3547 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a particularly quiet week ahead for the Aussie Dollar.

There are no material stats due out to provide the Aussie with direction in the week. While there are no stats, however, the RBA will deliver its monetary policy decision on Tuesday.

We don’t expect any moves, which puts the focus on the RBA rate statement.

A lack of stats and the lack of an RBA move would ultimately leave the Aussie Dollar in the hands of COVID-19 and trade chatter…

The Aussie Dollar ended the week up by 1.08% to $0.6939.

For the Kiwi Dollar:

It’s a relatively quiet week ahead on the economic calendar.

On Tuesday, 2nd quarter business confidence figures are due, with electronic card retail sales due out on Friday.

Expect both sets of numbers to influence, though electronic card retail sales should garner more interest.

From elsewhere, updates from the U.S and the EU on COVID-19 and any chatter on trade will also influence. The last thing that the Kiwi Dollar needs is a 2nd wave…

The Kiwi Dollar ended the week up by 1.68% to $0.6531.

For the Japanese Yen:

It is a quiet week ahead on the economic calendar.

Economic data is limited to May’s household spending figures and current account numbers. In a normal world, we would expect some influence from household spending figures.

At present, however, the Yen remains wedged between the Greenback and riskier assets.

Expect market risk sentiment to remain the key driver in the week.

The Japanese Yen ended the week down by 0.27% to ¥107.51 against the U.S Dollar.

Out of China

It’s a quiet week ahead on the economic data front. Key stats include June’s inflation figures. Don’t expect too much influence from the numbers, as the global markets grapple with COVID-19 and Trump…

The Chinese Yuan ended the week up 0.17% to CNY7.0663 against the U.S Dollar.

Geo-Politics

UK Politics:

There’s still no good news on the Brexit front, which continues to leave the Pound languishing at sub-$1.30 levels.

Following the lack of progress from last week, British PM Johnson began to talk positively about a no-deal Brexit.

Talks ended 1-day early on Thursday, with significant differences remaining and scuppering any hopes of progress.

The markets are not expecting Boris Johnson to compromise, which will leave the markets and the Pound in limbo until the talks resume.

There was some gamesmanship from the EU. Angela Merkel had reportedly requested that negotiators should prepare to leave trade talks without a deal.

We expect the news wires to be active on Brexit in the week ahead. It had been on the quieter side as the markets focused on economic data.

U.S Politics:

Foreign policy with China will be in the spotlight in the week as tensions between the U.S and China spike.

News from the weekend should certainly leave the markets in a cautious mood going into the week.

Reports of the U.S sending aircraft carriers to the South China Sea as China holds drills in the region is alarming.

Last week, the U.S moved forward on legislation to hit banks doing business with China. The move came in response to China’s national security law on Hong Kong. China has warned of taking every countermeasure available should the U.S President sign the Hong Kong Autonomy Act that the Senate approved last week.

The Coronavirus:

Over the weekend, news updates of a fresh spike in new COVID-19 cases will give the markets little comfort.

China, Germany, Italy, and South Korea all reported localized clusters. From the U.S, 12 states are reportedly pausing reopening. There was a new record high number of new cases reported on Saturday.

From the market’s perspective, the 3 key considerations have been:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. No spikes in new cases as a result of the easing of lockdown measures.
  • Governments continue to progress towards fully opening economies and borders.

Based on the figures last week and from the weekend, points ii) and iii) in particular have been market negative.

As the threat of a 2nd wave rises, it is also unlikely to have a vaccine in the coming weeks.

This is also market negative should the number of new cases continue to rise, as it would require the need for another total lockdown in affected economies.

At the time of writing, the total number of coronavirus cases stood at 11,378,918. Monday to Saturday, the total number of new cases increased by 1,339,869. Over the same period in the previous week, the total number had risen by 1,048,069.

Monday through Saturday, the U.S reported 361,275 new cases to take the total to 2,935,770. This was up from the previous week’s 239,880. On Saturday 4th July, there were 107,457 new cases.

For Germany, Italy, and Spain, there were 6,397 new cases Monday through Saturday. This took the total to 736,462. In the previous week, there had been 6,948 cases over the same period.

European Equities: A Week in Review – 04/07/20

The Majors

It was a bullish week for the European majors in the week ending 3rd July. Reversing last week’s 1.96% loss, the DAX30 rallied by 3.63% to lead the way. The CAC40 and EuroStoxx600 saw more modest gains of 1.99% and 1.98% respectively.

Throughout the week, positive economic data and news of progress towards a COVID-19 vaccine delivered the upside in the week.

A pullback on Friday limited the gains, however, as the markets capped a solid week of gains, with the U.S markets closed.

Progress towards a COVID-19 vaccine was supportive, but a continued rise in new cases across the U.S remained a concern.

The Stats

It was a busy week on the Eurozone economic calendar.

Key stats included June’s private sector PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone.

Germany’s unemployment figures for June and May’s consumer spending figures from France and Germany were also in focus.

There were few disappointments in the week, with France’s private sector returning to expansion in June. Both the manufacturing and services sectors reported an expansion in the month.

For the rest of the member states, a slower pace of contraction led to a rise in the Eurozone’s composite PMI from 31.9 to 48.5.

Unemployment figures from Germany were better than anticipated, with consumer spending rebounding in May.

The easing in lockdown measures supported the bounce back in spending and pickup in service sector activity in particular.

From the U.Snews

It was a mixed week on the day data front…

Private sector PMI numbers and the all-important nonfarm payrolls impressed in a shortened week. In June, nonfarm payrolls surged by a record 4.8m, following on from a 2.699m rise in May.

Initial jobless claims remained a concern, however, with jobless claims rising by 1.427m in the week ending 26th June.

From Elsewhere

Private sector PMIs from China also provided support, with the private sector seeing activity pick up in June. Weak overseas demand remained a concern at the turn of the quarter, however.

The Market Movers

From the DAX, it was a bullish week for the auto sector. BMW and Daimler led the way, rallying by 5.35% and by 3.00% respectively. Continental and Volkswagen saw more modest gains of 2.67% and 2.50% respectively.

It was also a bullish week for the banking sector. Commerzbank rallied by 9.91%, with Deutsche Bank gaining 4.85%.

From the DAX30, the story of the week was WIRECARD AG once more. Following a 94.15% slump last week, WIRECARD AG ended the week up by 131.21%.

From the CAC, it was a bullish week for the banks. Credit Agricole rallied by 7.92% to lead the way. BNP Paribas and Soc Gen weren’t far behind, with gains of 5.19% and 5.39% respectively.

The French auto sector also found support from the positive stats, with Peugeot and Renault rising by 3.18% and by 6.34% respectively.

Air France-KLM and Airbus found much-needed support, with the pair rising by 5.17% and by 6.06% respectively.

On the VIX Index

It was another week in the red, with the VIX seeing red for 3rd consecutive week. In the week ending 3rd July, the VIX tumbled by 20.3%. Following on from a 1.11% fall from the previous week, the VIX ended the week at 27.68.

Economic data from the U.S and beyond allowed the markets to look past the continued upward trend in new COVID-19 cases.

The S&P500 ended the week up by 4.02%, with the Dow and NASDAQ gaining 3.25% and by 4.62% respectively.

VIX/USD 04/07/20 Daily Chart

The Week Ahead

It’s a quieter week ahead on the Eurozone economic calendar. Key stats include May’s factory orders, industrial production, and trade figures from Germany.

The markets will likely brush aside the Eurozone’s retail sales figures for May.

From elsewhere

Expect ISM Non-Manufacturing numbers from the U.S to also provide direction in the early part of the week.

With economic data on the lighter side, we can expect COVID-19 and geopolitics to take center stage.

The markets will need to receive news of more progress towards a COVID-19 vaccine and for U.S states to resume reopening. It’s a combination that may not be forthcoming when looking at the upward trend in new cases.

On the geopolitical front, China is back in focus, following last week’s events. Expect any rise in tensions to test risk appetite in the week. From the EU, any chatter on the Recovery Fund will also influence.

European Equities: Service Sector PMIs and COVID-19 News to Guide the Majors

Economic Calendar:

Friday, 3rd July

Spanish Services PMI (Jun)

Italian Services PMI (Jun)

French Services PMI (Jun) Final

German Services PMI (Jun) Final

Eurozone Markit Composite PMI (Jun) Final

Eurozone Services PMI (Jun) Final

The Majors

It was a particularly bullish day for the European majors on Thursday. As the market angst over COVID-19 eased, the focus returned to economic data and U.S stats in particular.

The DAX30 rallied by 2.84% to lead the way, with the CAC30 and EuroStoxx600 gaining 2.49% and 1.97% respectively.

Ahead of the European open, market sentiment on progress towards a COVID-19 vaccine had provided support to riskier assets.

Better than expected unemployment figures from the Eurozone were followed by a surge in nonfarm payrolls in June.

The markets were able to brush aside disappointing wage growth and weekly jobless claims figures. Importantly, the unemployment rate fell back to 11.1% in spite of the participation rate rising to 61.5%.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. May unemployment figures for the Eurozone were in focus in the early part of the day.

According to Eurostat, the Eurozone’s unemployment rate rose from 7.3% to 7.4%. Economists had forecast a rise to 7.7%.

The figures had a muted impact on the majors, however, with June private sector PMIs pointing to a continued economic recovery.

From the U.S

It was a particularly busy day, with economic data including June’s nonfarm payrolls, unemployment rate, and weekly jobless claims.

U.S wage growth, trade, and factory order figures had a muted impact. The focus was on the pace of hiring. Improving labor market conditions is a must to support a return to economic growth.

In June, nonfarm payrolls rose by a record 4.8m, following a 2.699m increase in May. Economists had forecast a 3.0m increase.

Initial jobless claims increased by 1.427m in the week ending 26th June, following a 1.482m rise in the week prior. Economists had forecast a 1.355m rise.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector on Thursday. BMW and Daimler led the way, with gains of 3.21% and 4.09% respectively. Continental and Volkswagen weren’t far behind, with the pair rising by 2.46% and by 2.56% respectively.

It was also a bullish day for the banks. Deutsche Bank rose by 2.22%, with Commerzbank ending the day up by 4.27%.

WIRECARD AG saw another slide on Thursday. Following a 38.95% loss Wednesday, WIRECARD AG ended the day down by 32.14%.

From the CAC, it was a big day for the banks. BNP Paribas and Soc Gen rallied by 5.43% and by 5.50% to lead the way. Credit Agricole rose by 4.46%.

The French auto sector also managed to recover from a bearish Wednesday. Peugeot and Renault rose by 3.72% and by 5.14% respectively.

Air France-KLM and Airbus SE saw gains of 2.41% and 3.46% respectively.

On the VIX Index

It was a 4th consecutive day in the red for the VIX, which fell by 3.28% on Thursday. Following on from a 5.95% decline on Wednesday, the VIX ended the day at 27.68.

Economic data from the U.S delivered a boost to the U.S equity markets, with the June Nonfarm payroll numbers impressive.

News of progress towards a COVID-19 vaccine and hopes of more stimulus also provided support. It was enough for the markets to shift focus away from the spike in new COVID-19 cases in the U.S.

The S&P500 and NASDAQ rose by 0.45% and by 0.52%, with the Dow gaining 0.36%.

VIX 03/07/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. June’s service sector and composite PMIs are due out of Italy and Spain.

Finalized PMIs are also due out of France, Germany, and the Eurozone.

Expect Italy and the Eurozone’s PMIs and any revision to France and Germany’s figures to have the greatest influence.

From the U.S

There are no material stats to provide the European majors with direction. The U.S markets are closed on the day.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 190,716 to 10,985,093. On Wednesday, the number of new cases had risen by 210,499. The daily increase was lower than Wednesday’s rise and down from 235,258 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,027 new cases on Thursday, which was down from 1,062 new cases on Wednesday. On the previous Thursday, 1,286 new cases had been reported.

From the U.S, the total number of cases rose by 48,853 to 2,828,313 on Thursday. On Wednesday, the total number of cases had risen by 51,607. On Thursday, 25th June, a total of 45,503 new cases had been reported.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Majors to Respond to COVID-19 Vaccine News ahead of U.S Stats

Economic Calendar:

Thursday, 2nd July

Eurozone Unemployment Rate (May)

Friday, 3rd July

Spanish Services PMI (Jun)

Italian Services PMI (Jun)

French Services PMI (Jun) Final

German Services PMI (Jun) Final

Eurozone Markit Composite PMI (Jun) Final

Eurozone Services PMI (Jun) Final

The Majors

It was a mixed day for the majors on Wednesday. The EuroStoxx600 rose by 0.24%, while the DAX30 and CAC40 slipped fell by 0.41% and by 0.18% respectively.

Economic data took a backseat in the early part of the European session. Concerns over how the €750bn Euro Recovery Fund will be disbursed tested the markets early on. Negative chatter on Brexit also weighed, as Merkel spoke of the rising chances of a no-deal Brexit.

On the positive, however, and limiting the downside for the DAX30 and CAC40 was upbeat news on a COVID-19 vaccine.

The Stats

It was a particularly busy day on the Eurozone economic calendar on Wednesday.

Key stats included June Manufacturing PMIs for Italy and Spain and German retail sales and unemployment figures.

For France, Germany, and the Eurozone there were also finalized June Manufacturing PMIs in focus.

Out of Germany

In May, retail sales jumped by 13.9%, reversing a 6.5% decline from April. Economists had forecast a 3.9% increase. According to figures released by Destatis, sales were up by 3.8% on the same month a year earlier.

In June, Germany’s unemployment rate rose from 6.3% to 6.4%. This was below a forecast of 6.6%. Unemployment increased by 69K, following a 238k rise in May. Economists had forecast a 120k increase.

Germany’s Manufacturing PMI came in at 45.2, which was up from a prelim 44.6. In May, the PMI had stood at 36.6.

The Rest of the PMIs

From Italy, the manufacturing PMI rose from 45.4 to 47.5, coming up short of a forecasted 47.7.

Spain’s manufacturing PMI rose from 38.3 to 49.0, which was well above a forecasted 45.1.

The French Manufacturing PMI came in at 52.3, which was up from a prelim 52.1 and 40.6 in May.

The Eurozone’s manufacturing PMI rose from a prelim 46.9 to 47.4. Economists had forecast a PMI of 46.9. In May, the PMI had stood at 39.4.

From the U.S

It was also a busy day, with economic data including June’s ADP nonfarm employment change and ISM Manufacturing PMI numbers.

In June, the ADP reported a 2.329m rise in nonfarm, following on from a 3.065m rise in May. Economists had forecast a 3m increase.

The ISM Manufacturing PMI increased from 43.1 to 52.6 in June. Economists had forecast a rise to 49.5.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Wednesday. Continental and Daimler led the way, with losses of 3.27% and 1.68% respectively. BMW and Volkswagen fell by 1.19 and by 1.49% respectively.

It was also a bearish day for the banks. Deutsche Bank slid by 2.10%, while Commerzbank fell by just 0.18%.

WIRECARD AG returned to the red with a 38.95% loss following Tuesday’s 96.38% breakout.

From the CAC, it was a bearish day for the banks. BNP Paribas fell by 1.84% to lead the way down. Credit Agricole and Soc Gen saw more modest losses of 0.59% and 0.73% respectively.

The French auto sector also struggled after a bullish start to the week. Peugeot and Renault fell by 2.62% and by 4.78% respectively.

Air France-KLM and Airbus SE bucked the trend, with gains of 0.92% and 1.05% respectively.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX, which fell by 5.95% on Wednesday. Following on from a 4.25% decline on Tuesday, the VIX ended the day at 28.62.

Positive stats from the U.S and news of progress towards a COVID-19 vaccine delivered the U.S major indexes with support.

The S&P500 and NASDAQ rose by 0.50% and by 0.95%, while the Dow slipped by 0.30%.

VIX 02/07/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. May unemployment figures are due out of the Eurozone that should have a muted impact on the majors.

Going into the European session, the markets responded further to the positive COVID-19 vaccine news.

From the U.S

It’s a busy day ahead. June’s nonfarm payrolls and unemployment rate are due out along with the weekly jobless claims.

Expect the stats to be a key driver on the day. Any weak numbers would send the European majors into the red.

Away from the economic calendar, COVID-19 news and geopolitics will also be key drivers… Expect some chatter from the U.S President following the NFP numbers.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 210,499 to 10,794,377. On Tuesday, the number of new cases had risen by 201,507. The daily increase was higher than Tuesday’s rise and up from 174,860 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 1,062 new cases on Wednesday, which was up from 934 new cases on Tuesday. On the previous Wednesday, 1,463 new cases had been reported.

From the U.S, the total number of cases rose by 51,607 to 2,779,460 on Wednesday. On Tuesday, the total number of cases had risen by 53,471. On Wednesday, 24th June, a total of 38,253 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 110 points, with the Dow up by 53 points.

For a look at all of today’s economic events, check out our economic calendar.

Mid-Week Themes – Stats, Brexit, COVID-19 and Stimulus Keep the Markets Busy

It is not only the end of the month but also the end of the quarter this week.

What are the top highlights for our today’s discussion?

We’ve got to be looking at the markets that are constantly battling. There is the constant support from the likes of the FED that’s propping up the equity markets.

The U.S equity markets saw their best quarter since 1987 and the EU markets their best since 2015. Quite remarkable when you consider the current economic environment.

While governments and central banks continue to deliver support, there is a COVID-19 reality, however. The upward trend in new COVID-19 cases has persisted, leading to the pause in reopening in the U.S.

There’s good news for the EU, however, which is removing the ban on non-essential travel today. COVID-19 numbers out of the EU have also been relatively stable in spite of reopening. So, the European equity markets should be playing catch-up and outgunning the U.S majors.

For the U.S, COVID-19 remains a major economic hindrance, as the EU continues to reopen and recover from the meltdown.

An overdoing of the stimulus could cause uncontrolled inflation and government debt not seen before.

Meanwhile, what about macroeconomic data releases?

For the EU, you’ve got service sector PMI numbers due out on Friday and today’s Germany unemployment and retail sales figures. These are key.

From the U.S, we saw consumer confidence jump in June according to figures released on Tuesday.

On Thursday, nonfarm payrolls and weekly jobless claims are in focus. There must be an improvement in labor market conditions to support the view of this economic recovery.

If NFP numbers disappoint, then the markets really need to reconsider what lies ahead. ADP nonfarm employment change figures from Wednesday will give the markets a taste of what’s to come.

The FED will continue to throw money into the markets. Such moves are unsustainable, however, if labor market conditions deteriorate further.

Next week, we then have the ISM non-manufacturing PMI out of the U.S. It’s all about service sector activity. Labor market conditions need to improve, which drives consumption, which in turn drives the services sector. We should then see a pickup in the manufacturing sector activity.

The last NFP release caused a more than 50 pip move on the EUR/USD. Three months before that it was in the range from 25 to 30 pips.

What about geopolitics?

You’ve still got Brexit. There’s been some recent debate on whether it would actually be better for Britain to leave without a deal.

One thing is certain, Boris Johnson is not going to buckle to any demands from the EU. The Tory Party is majority pro-Brexit, so there’s going to be no compromises when it comes to negotiations.

Let’s not forget a no-deal outcome could be better for the British people and the economy and not a negative.

The Pound has held fairly steady when you consider the fact that the chances of a hard Brexit rise by the day.

Elsewhere, trade wars… The U.S is threatening tariffs on the EU and then there’s the U.S and China.

These are all simmering in the background and could prop up at any time when you consider Trump languishing in the polls behind Biden.

It really has been one mistake after the other for Trump. The U.S President is going to need plenty of distraction tactics and spin to have a chance of a 2nd term.

European Equities: Eurozone and U.S Stats and COVID-19 Figures in the Spotlight

Economic Calendar: 

Wednesday, 1st July

German Retail Sales (MoM) (May)

Spanish Manufacturing PMI (Jun)

Italian Manufacturing PMI (Jun)

French Manufacturing PMI (Jun) Final

German Manufacturing PMI (Jun) Final

German Unemployment Change (Jun)

German Unemployment Rate (Jun)

Eurozone Manufacturing PMI (Jun) Final

Thursday, 2nd July

Eurozone Unemployment Rate (May)

Friday, 3rd July

Spanish Services PMI (Jun)

Italian Services PMI (Jun)

French Services PMI (Jun) Final

German Services PMI (Jun) Final

Eurozone Markit Composite PMI (Jun) Final

Eurozone Services PMI (Jun) Final

The Majors

It was a mixed day for the majors on Tuesday. The DAX30 and EuroStoxx600 rose by 0.64% and by 0.13%, while the CAC40 slipped by 0.19%.

Negative sentiment towards the upward trend in new COVID-19 cases continued to weigh on the majors on Tuesday.

There was support, however, as the EU readied to lift the nonessential travel ban on Wednesday. Positive manufacturing data out of China was also positive.

Later in the day, economic data from the Eurozone and the U.S also provided support. All in all, it was a positive end to the best quarter in 5-years.

The Stats

It was a busy day on the Eurozone economic calendar on Tuesday.

Key stats included French consumer figures for May and prelim June inflation figures for the Eurozone.

According to Insee, French consumer spending jumped by 36.6% in May, reversing a lockdown driven 20.2% slide in April.

From the Eurozone, inflationary pressures picked up, with the Eurozone’s annual rate of inflation rising from 0.1% to 0.2%.

According to Eurostat:

  • The annual rate of inflation picked up from 0.1% to 0.3% in June, according to prelim figures.
    • Food, alcohol, and tobacco prices rose by 3.1%, compared with 3.4% in May.
    • Prices for services increased by 1.2%, compared with 1.3% in May.
    • Non-energy industrial goods also contributed, with a 0.2% rise in prices, after a stable May.
    • Energy prices continued to drag. In June, prices fell by 9.4% following an 11.9% slide in May.
  • Month-on-month, consumer prices increased by 0.3%, reversing a 0.1% decline in May.
  • The annual rate of core inflation softened from 0.9% to 0.8%, however.

Prelim inflation figures for Italy and France and finalized GDP numbers for Spain had a muted impact on the majors.

From the U.S

It was a relatively busy day, with economic data including June’s consumer confidence and Chicago PMI numbers.

The CB Consumer Confidence Index jumped from 85.9 to 98.1 in June, supporting a positive outlook on consumption.

An improvement in consumer confidence was enough to offset the disappointing Chicago PMI number for June. The PMI increased from 32.3 to 36.6, falling well short of a forecasted 45.0.

The Market Movers

For the DAX: It was another bullish day for the auto sector on Tuesday. Daimler and Volkswagen led the way, with gains of 1.16% and 0.59% respectively. BMW and Continental rose by 0.37% and by 0.21% respectively.

It was a mixed day for the banks, however, with Deutsche Bank rising by 1.0%, while Commerzbank ended the day flat.

WIRECARD AG grabbed the headlines once more, surging by 96.38%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole rose by 0.06% and by 0.50% respectively, while Soc Gen fell by 0.76%.

The French auto sector found further support, with Peugeot and Renault ending the day up by 2.15% and 2.33% respectively.

Air France-KLM fell by 2.47%, however, while Airbus SE eked out a 0.27% gain.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX, which fell by 4.25%. Following on from an 8.49% decline on Monday, the VIX ended the day at 30.43.

Positive economic data overshadowed the upward trend in COVID-19 cases on the day to deliver the best quarter since the 1980s.

On the day, the S&P500 rose by 1.54%, with the Dow and NASDAQ gaining 0.85% and 1.87% respectively.

VIX 01/07/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. June manufacturing PMIs are due out of Italy and Spain, with unemployment and retail sales figures due out of Germany.

Finalized manufacturing PMIs are also due out of France, Germany, and the Eurozone.

We would expect Italy and the Eurozone’s Manufacturing PMIs and Germany’s stats to be the key drivers.

From the U.S

It’s a relatively busy day ahead. June’s ADP Employment Change figures are due out along with the market’s preferred ISM Manufacturing PMI.

The finalized Markit Manufacturing PMI is also due out though it will likely have a muted impact on the day.

For the markets, there will need to be a rebound in hiring to reverse May’s 2.76m slide in employment and a rise in the PMI…

Away from the numbers, expect COVID-19 and geopolitics to continue to be an area of focus and influence.

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 201,507 to 10,583,878. On Monday, the number of new cases had risen by 153,341. The daily increase was higher than Monday’s rise and up from 158,646 new cases from the previous Tuesday.

Germany, Italy, and Spain reported 934 new cases on Tuesday, which was up from 803 new cases on Monday. On the previous Tuesday, 952 new cases had been reported.

From the U.S, the total number of cases rose by 53.471 to 2,727,853 on Tuesday. On Monday, the total number of cases had risen by 41,940. On Tuesday, 23rd June, a total of 34,399 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 17 points, while the Dow was down by 104 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Month in Review – June 2020

The Majors

It was another bullish month for the European majors in June, as the markets continued to recover from The Meltdown.

The DAX30 and CAC40 rallied by 6.25% and 5.12% respectively to lead the way, with the EuroStoxx600 gaining 2.85%.

Themes throughout the month included the reopening of economies across the EU and the U.S and stimulus…

Central banks and governments stepped in to provide much-needed support, as the markets digested post lockdown economic indicators.

Late in the month, a threat of U.S tariffs on EU goods and a pause in the easing of lockdown measures tested risk sentiment.

In the U.S, news of U.S states hitting pause on reopening questioned the more optimistic outlook on the economic recovery.

It was not enough to sink the markets, however. Continued support from the FED and other central banks propped up the markets late in the month.

While June’s gains may seem minor, the 2nd quarter rebound was more impressive. The DAX30 rallied by 23.9%, with the CAC40 and EuroStoxx600 rising by 12.28% and 12.59% respectively.

Optimism coupled with monetary and fiscal policy support and the easing of lockdown measures fuelled the gains in the quarter.

The Stats

It was a busy month on the Eurozone economic calendar. June’s prelim private sector PMIs were the headline stats of the month, which led to a less gloomy economic outlook for the Eurozone.

Following an uptick in May, further improvement in June was key to the upside in the European majors.

Supporting the uptick in service sector activity was a pickup in both business and consumer confidence. For the economic recovery, consumer confidence and spending remained key to supporting a service sector-driven recovery.

From the U.S

Private sector PMIs reflected a similar trend, with both the manufacturing and services sectors seeing a slower pace of contraction. This was coupled with a rebound in durable and core durable goods orders.

While retail sales also bounced back from April’s, there was evidence, however, that labor market conditions would likely take longer to recover.

In spite of May’s nonfarm payrolls impressing at the start of the month, the weekly jobless claims continued to report high numbers.

From an economic and service sector perspective, however, improving consumer confidence was key. At the end of the month, June’s CB Consumer Confidence Index jumped from 85.9 to 98.1.

Monetary and Fiscal Policy

In the June monetary policy decision, the ECB left interest rate and deposit rates unchanged, which was in line with market expectations. The ECB did crank up the size of the emergency purchasing program of bonds to €1.35tn and extended it by an additional 6-months to 30th June 2021.

Outside of the monthly policy meeting, the ECB also delivered a Eurosystem repo facility for central banks outside of the Eurozone. The move provided further support to the European majors late in the month.

Perhaps the FED’s move to begin acquiring individual corporate bonds was most impressive in June. Mid-month, the FED announced that it would purchase up to $250bn in individual corporate bonds. Named the Secondary Market Corporate Credit Facility, eligible bonds had to be rated investment grade as at March 22nd, 2020.

The Market Movers

For the DAX: It was another mixed month for the auto sector. Continental fell by 2.17% to buck the trend in the month. BMW and Daimler rallied by 7.47% and by 7.67% respectively, while Volkswagen rose by 2.16%.

It was another bullish month for the banks. Deutsche Bank rallied by 11.74%, with Commerzbank up by 13.31%.

Deutsche Lufthansa rose by a more modest 7.79%.

From the CAC, it was a bullish month for the banking sector. BNP Paribas and Credit Agricole rose by 9.64% and by 7.80% respectively. Soc Gen rallied by 11.87%, however, to lead the way.

It was also a bullish month for the auto sector. Peugeot and Renault rallied by 13.04% and by 11.78% respectively.

Air France-KLM and Airbus SE had a mixed month. While Air France-KLM fell by 0.74%, Airbus SE rallied by 12.03%.

On the VIX Index

In June, COVID-19 and geopolitics provided some upside in the VIX following the pullback in May.

The VIX rose by 10.61% in June to bring to an end 2 consecutive months in the red. Partially reversing a 19.44% slide from May, the VIX ended the month at 30.43.

The VIX had seen 4 consecutive months in the green before the reversal began in April.

Across the U.S equity markets, the S&P500 rose by 1.84%, with the Dow and NASDAQ gaining 1.69% and 5.99% respectively.

FED support and plenty of fiscal stimulus delivered the upside. Late in the month, U.S states began hitting pause on reopening as new COVID-19 cases began to spike.

The Month Ahead

It’s another busy month ahead on the Eurozone economic calendar.

An upward trend in the private sector PMIs through to July would need to continue for the markets to find a further upside.

The markets would also need to see a further pickup in both business and consumer confidence to support consumption.

Consumers would need to see improved labor market conditions to fuel consumption and a service sector-driven economic recovery.

On the monetary policy front, the ECB will need to continue to assure the markets of further support. Brussels and EU member states will also need to be on the same page vis-à-vis distribution of funds to support COVID-19 stricken economies.

From elsewhere, we continue to expect stats from the U.S and China to also garner plenty of attention.

Geopolitics and COVID-19 will also remain in focus. In June, Trump looked to distract U.S voters, by threatening the EU with tariffs. There had also been the talk of the U.S – China trade agreement being “over”.

With Trump on the back foot, election wise, expect more of the same if not more in the month ahead. Politically, the U.S President couldn’t have got things more wrong in June. Racism also took center stage, with protests and riots gripping the U.S following the unlawful killing of Floyd George.

If that’s not enough to keep the markets busy, it’s also corporate earnings season…

European Equities: Economic Data and COVID-19 to Keep the Markets Busy

Economic Calendar:

 Tuesday, 30th June

French Consumer Spending (MoM) (May)

Spanish GDP (QoQ) (Q1) Final

Italian CPI (MoM) (Jun) Prelim

Eurozone CPI (YoY) (Jun) Prelim

Wednesday, 1st July

German Retail Sales (MoM) (May)

Spanish Manufacturing PMI (Jun)

Italian Manufacturing PMI (Jun)

French Manufacturing PMI (Jun) Final

German Manufacturing PMI (Jun) Final

German Unemployment Change (Jun)

German Unemployment Rate (Jun)

Eurozone Manufacturing PMI (Jun) Final

Thursday, 2nd July

Eurozone Unemployment Rate (May)

Friday, 3rd July

Spanish Services PMI (Jun)

Italian Services PMI (Jun)

French Services PMI (Jun) Final

German Services PMI (Jun) Final

Eurozone Markit Composite PMI (Jun) Final

Eurozone Services PMI (Jun) Final

The Majors

It was a relatively bullish start to the week as the majors looked to recover from Friday’s COVID-19 driven pullback.

The DAX30 rose by 1.18% to lead the way, with the CAC40 and EuroStoxx600 seeing gains of 0.73% and 0.44% respectively.

Economic data out of China from Sunday and the U.S on Monday contributed to the upside on the day. It was U.S stimulus talk once more, however, that drove the majors. A bounce in the U.S markets late in the European session supported the stronger gains on the day.

Concerns over COVID-19 and the increased risk of a 2nd wave continued to pin back the majors on the day.

The Stats

It was a quiet day on the Eurozone economic calendar on Monday. June’s prelim inflation figures for Germany and Spain were in focus on the day.

The numbers had a muted impact on the majors, however, in spite of better than expected numbers.

In Spain, consumer prices fell by 0.3% in June, according to prelim figures, following a 0.9% decline in May. From Germany, consumer prices rose by 0.6%, reversing a 0.1% decline in May.

From the U.S

It was a relatively quiet day, with economic data limited to pending home sales for May that impressed. Pending home sales surged by 44.3%, month-on-month, reversing a 21.8% slide from April.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. Continental and Daimler led the way, rallying by 2.95% and 2.80% respectively. BMW and Volkswagen weren’t far behind, with gains of 1.83% and 1.55% respectively.

It was a particularly bullish day for the banks, with Deutsche Bank and Commerzbank seeing gains of 4.38% and 5.65% respectively.

WIRECARD AG continued to grab the headlines, surging by 151.42%. News of interest in buying parts of the business drove shares northwards on the day.

From the CAC, the banks reversed losses from Friday at the start of the week. Credit Agricole led the way, rallying by 3.74%. BNP Paribas and Soc Gen rose by 2.51% and 2.97% respectively.

The French auto sector also found support, with Peugeot and Renault ending the day up by 2.35% and 5.25% respectively.

Air France-KLM and Airbus SE gained 3.27% and 2.38% respectively.

On the VIX Index

The pendulum swung back in the favour of riskier assets on Monday, leaving the VIX back in the red. Reversing a 7.79% rise from Friday, the VIX fell by 8.49% to end the day at 31.78.

At the start of the week, the markets beyond COVID-19 woes, as talk of further stimulus supported the U.S indexes

The S&P500 and Dow rose by 1.47% and by 2.32% respectively, with the NASDAQ gaining a more modest 1.20%.

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. French consumer spending figures for May and prelim June inflation figures for the Eurozone are due out.

Also due out are prelim inflation figures from Italy and finalized 1st quarter GDP numbers from Spain. These should have a muted impact on the day, however.

From the U.S

It’s also a relatively busy day ahead, with June’s Chicago PMI and consumer confidence figures are due out later in the session. Expect both sets of numbers to have some influence on the European majors.

Ahead of the European open, expect private sector PMIs from China to set the tone.

Away from the numbers, expect COVID-19 and geopolitics to continue to be an area of focus and influence.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 153,341 to 10,382,371. On Sunday, the number of new cases had risen by 136,417. The daily increase was higher than Sunday’s rise and up from 126,214 new cases from the previous Monday.

Germany, Italy, and Spain reported 803 new cases on Monday, which was up from 650 new cases on Sunday. On the previous Monday, 952 new cases had been reported.

From the U.S, the total number of cases rose by 41,940 to 2,674,382 on Monday. On Sunday, the total number of cases had risen by 35,905. On Monday, 22nd June, a total of 29,864 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the Dow was up by 18 points.

For a look at all of today’s economic events, check out our economic calendar.

Virus Resurgence Concerns, Set to Keep Markets on the Defensive

Rising infection rates in the US, which saw some US states either postpone their reopening’s or close back down again, saw equity markets slide lower on the week on Friday, over concerns that any economic recovery may well take longer to take hold. In spite of these concerns the losses that we saw turned out to be fairly modest when compared to previous sessions, as well as previous weeks.

There is no question that some investors are calling into question the pace of any recovery in economic output, with gold prices hitting their highest levels since October 2012, however the reality remains that while there is concern about the economic impact of a second lockdown, the bar to another countrywide one being implemented remains very high indeed.

The damage already done in other parts of the health care sector has likely put paid to that idea, which means investors, like everyone else will have to get used to the fact that Covid-19 is here to stay, and we will all have to learn to live with it, along with the related impact on our day to day lives.

As we start a new week, as well as coming to the end of the month and Q2, these concerns about a much more prolonged recovery, as infection rates continue to rise in a number of US states, are likely to be more of a drag on US stocks in the short term, though they are also set to act as a drag elsewhere as well.

These concerns look likely to overshadow some of the more positive sentiment elsewhere, as economic data continues to show further signs of improving in places like Asia and Europe, where second wave concerns aren’t anywhere near as immediate for now, though new localised outbreaks in China and South Korea over the weekend, continue to act as reminders that the virus remains far from defeated.

Crude oil prices also slipped back a touch last week, and have continued to weaken after hitting their highest levels since 6th March last week, retracing 50% of the decline from this year’s peaks to the April lows in the process. A large part of the reason for the pause has been concern about the rise in cases in the US, as well lower demand as US driving season gets under way in earnest.

Last week the IMF became the latest global organisation to downgrade its forecasts for the global economy, joining the likes of the OECD and World Bank in painting a pessimistic outlook for any recovery this year. It was notable that the fund was more optimistic than the likes of the OECD and Word Bank on a global basis with a -4.9% prediction, while its regional outlook was also more varied.

For example, the IMF predicted an -8% contraction in the US, a much more pessimistic assessment than the OECD’s -7.3% contraction estimate, with the IMF much more optimistic about China, than the OECD. The fact is a lot of these assessments are guesswork, reliant on a whole host of unknowns including the prospect of a second wave in the autumn, as the weather gets colder and populations are forced back indoors.

Markets in Asia have taken their cues from Fridays sharp fall in the US, the continued rise in infection rates over the weekend, and the rise in global deaths to over 500k by trading lower, and this weakness is set to manifest itself into a similarly weaker open here in Europe this morning.

This week we’ll get another insight into how well the restarting of economic activity is going across Asia, Europe and the US, with the latest insight into economic activity in June, as lockdown measures continue to get eased, and governments try to restore a semblance of normality to everyday life.

Tomorrow the UK government is set to layout its own plans for an investment bonanza with extra money for infrastructure, schools and hospitals, against a backdrop of the worst economic outlook since the second world war.  The details are expected to be laid out by PM Johnson in an announcement sometime tomorrow.

The further easing of flight and travel restrictions and quarantine measures across Europe in the coming days, could well help give another lift to the travel sector, while reports from TUI and Hays Travel over the weekend of a surge in bookings, is encouraging that something could be salvaged from what’s left of the remaining 2020 summer holiday season, not only here in the UK, but also in Europe as well.

EURUSD – found support at the 1.1160/70 area last week, before rebounding back towards the 1.1350 area. Currently appears to be struggling to maintain the momentum from the lows in May, with a break below 1.1160 potentially opening up a return to the 1.1020 area and the 50, and 200-day MA’s.  Above the 1.1350 area retargets the highs from June at 1.1425.

GBPUSD – last week’s rebound to the 1.2540 area quickly ran out of steam keeping the prospect of a move towards the May lows at 1.2075 a realistic possibility. A move below the1.2300 level could well be the beginning of such a scenario with 1.2240 the next key support.

EURGBP – while above the 0.9000 area the bias remains for a move back to the 0.9240 area, if we Trend line support from the lows this year comes in at the 0.8950 area.

USDJPY – last week’s low at 106.00 has seen the US dollar rebound towards the 107.50 area. We need to see a move back through here and the 50-day MA to argue for a move towards the 108.00 initially and then potentially the 108.70 area.

FTSE100 is expected to open 37 points lower at 6,122

DAX is expected to open 89 points lower at 12,000

CAC40 is expected to open 34 points lower at 4,875

For a look at all of today’s economic events, check out our economic calendar.

By Michael Hewson (Chief Market Analyst at CMC Markets UK)

European Equities: A Quiet Economic Calendar Leaves COVID-19 in Focus

Economic Calendar: 

Monday, 29th June

Spanish HICP (YoY) (Jun) Prelim

German CPI (MoM) (Jun) Prelim

Tuesday, 30th June

French Consumer Spending (MoM) (May)

Spanish GDP (QoQ) (Q1) Final

Italian CPI (MoM) (Jun) Prelim

Eurozone CPI (YoY) (Jun) Prelim

Wednesday, 1st July

German Retail Sales (MoM) (May)

Spanish Manufacturing PMI (Jun)

Italian Manufacturing PMI (Jun)

French Manufacturing PMI (Jun) Final

German Manufacturing PMI (Jun) Final

German Unemployment Change (Jun)

German Unemployment Rate (Jun)

Eurozone Manufacturing PMI (Jun) Final

Thursday, 2nd July

Eurozone Unemployment Rate (May)

Friday, 3rd July

Spanish Services PMI (Jun)

Italian Services PMI (Jun)

French Services PMI (Jun) Final

German Services PMI (Jun) Final

Eurozone Markit Composite PMI (Jun) Final

Eurozone Services PMI (Jun) Final

The Majors

It was a relatively bearish end to the week for the European majors on Friday, as the majors partially reversed Thursday’s gains.

The DAX30 fell by 0.73%, while the CAC40 and EuroStoxx600 ended the day with relatively minor losses of 0.18% and 0.39% respectively.

Economic data from the U.S took a back seat at the end of the week as the market focus returned to the coronavirus.

Reports of U.S states pausing reopening measures amidst rising new coronavirus cases weighed on risk sentiment on the day.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Friday. There were no material stats to provide the European majors with direction at the end of the week.

From the U.S

It was a busy day on the economic calendar. Key stats included the FED’s preferred inflation figures and personal spending numbers for May. Finalized consumer sentiment figures for June were also in focus.

Ultimately, however, the numbers had a limited impact on the European majors on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector, reversing Thursday’s recovery. BMW and Daimler led the way down, sliding by 3.38% and 3.68% respectively. Continental and Volkswagen saw more modest losses of 2.57% and 1.16% respectively.

It was a particularly bearish day for the banks, with Deutsche Bank and Commerzbank sliding by 5.53% and by 4.26% respectively.

WIRECARD AG tumbled by 53.22% following a 74.9% slump from the previous day.

From the CAC, the banks fell back into the red on Friday. Credit Agricole led the way down, sliding by 2.34%. BNP Paribas and Soc Gen declined by 1.96% and 1.84% respectively.

The French auto sector also saw red, with Peugeot and Renault ending the day with losses of 2.53% and 1.99% respectively.

Things were no better for Air France-KLM and Airbus SE, which slid by 3.36% and by 3.19% respectively.

On the VIX Index

It was back into the green for the VIX. Reversing a 4.79% fall from Thursday, the VIX rose by 7.79% to end the day at 34.73.

Market reaction to COVID-19 news at the end of the week weighed on the U.S equity markets.

The S&P500 and Dow fell by 2.42% and by 2.84% respectively, with the NASDAQ declining by 2.59%.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. June’s prelim inflation figures are due out of Spain and Germany.

We expect the stats to have a muted impact on the majors, with updates on COVID-19 from the weekend likely to be the key driver.

From the U.S

It’s also a quiet day ahead, with May’s pending home sales figures also likely to be brushed aside by the markets.

A lack of stats will leave the majors in the hands of Trump and the U.S administration and updates on COVID-19 late in the day.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 136,417 to 10,229,030. On Saturday, the number of new cases had risen by 208,420. The daily increase was lower than Saturday’s rise while up from 131,020 new cases from the previous Sunday.

Germany, Italy, and Spain reported 650 new cases on Sunday, which was down from 1,029 new cases on Saturday. On the previous Sunday, 917 new cases had been reported.

From the U.S, the total number of cases rose by 35,905 to 2,632,442 on Sunday. On Saturday, the total number of cases had risen by 48,661. On Sunday, 21st June, a total of 26,079 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was down by 38 points, with the Dow down by 42 points.

For a look at all of today’s economic events, check out our economic calendar.