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.

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.

COVID-19 Cases Hit 3m in the U.S and the Numbers Are Set to Continue Rising

In the U.S, a new milestone of 3m infections was hit in the battle against the COVID-19 pandemic.

There has been nothing positive on the news wires for some time in relation to the coronavirus.

While there had been the hope of an effective vaccine, the virus appears to have more havoc to wreak on the U.S and the global economy.

The U.S in Contrast

At the time of writing, the total number of COVID-19 cases in the U.S sits at 3,097,538. According to Tuesday’s figures, the U.S accounted for more than a quarter of the world’s total number of infected.

Not only has the U.S been most severely affected but also has recorded the largest number of COVID-19 related deaths. As of Tuesday, the U.S had recorded 133,991 COVID-19 related deaths.

To put this into perspective, Brazil has the 2nd largest number of infections at 1,674,655. Brazil also has the 2nd largest number of COVID-19 related deaths, currently standing at 66,868.

To make a stark comparison, the percentage of the U.S population infected stands at 9.4%, while just 0.8% of Brazil’s population has been infected.

When looking at the mortality rate, the U.S mortality rate sits at 4.3%, versus Brazil’s 4.0%.

These figures ultimately reflect the success of the respective governments in curbing the spread of the virus.

The Administration and the Polls

Trump’s decision to push U.S states to begin reopening will be considered a grave mistake by many.

For the U.S administration, an about-turn on the reopening of the U.S economy could end Trump’s chances for office.

Looking at the FT’s interactive Calculator and polling data, Biden still looks set for an easy win in November. He has seen his share of the electorate college vote slip marginally, however.

It remains to be seen whether that slippage was as a result of the record rise in nonfarm payrolls in June. The good news for Biden and bad news for Trump, however, is that Trump’s share remains at 148 Electoral College votes.

The number of Electoral College votes that are now up for grabs has risen from 72 to 109. As was the case at the start of the month, even if Trump takes all 109, he would still fall short of the 270 needed to win.

These latest numbers are as at 6th July.

COVID-19 and the Global Financial Markets

Following a bullish start to the week, we’ve seen the appetite for riskier assets wane on Tuesday and Wednesday.

Economic indicators have continued to support a speedier economic recovery than initially expected.

The increased spread of the coronavirus will likely slow the pace of the recovery, however. For the markets, the only uncertainty is to what extent the recovery will slow.

One economic indicator that has continued to flash red amidst all the hype has been the U.S weekly jobless claims.

These figures have continued to reflect dire labor market conditions and have shown little sign of falling to pre-pandemic levels.

A continued upward trend in COVID-19 cases across the U.S will likely lead to a rise in these weekly claims. Lag or no lag, we have not seen sub-1m levels since 281,000 claims back in the week ending 13th March.

Can the markets pallet another 1.4m jump amidst the accelerated spread of the virus?

We can expect plenty of market sensitivity to tomorrow’s figures. More alarmingly, is news of the WHO reportedly acknowledging that there is evidence emerging of the airborne transmission of the virus.

Airborne transmission coupled with the continued reopening of the U.S economy does not bode well.

In reality, however, we have yet to see the global financial markets shudder at the prospects of a full-blown 2nd wave.

At some point, this may change, particularly if U.S State governors rebel and shut down the most populous U.S states.

According to Reuters, California, Hawaii, Idaho, Missouri, Montana, Oklahoma, and Texas, all reported new record highs on Tuesday.

The two largest U.S states, California and Texas reported more than 10,000 new cases each on Tuesday.

Importantly, the numbers have also shown that there has been no summertime decline in transmission.

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.

The RBA, COVID-19, and the Aussie Dollar

The RBA left monetary policy unchanged this morning, which had been widely anticipated by the broader market. The Board decided to leave the targets for the cash rate and the yield on 3-year government bonds at 25 basis points.

While monetary policy was left unchanged, the RBAs view of the economy and recovery was of interest. Even more so since the rising number of COVID-19 cases in the country and new lockdown measures taken in Melbourne.

Yesterday, news hit the wires of Australia shutting down the border between Victoria and New South Wales.

When considering the RBA’s reliance on consumer spending to drive the economic rebound, the latest news is alarming.

The RBA Rate Statement and the Aussie Dollar

From the RBA Rate Statement this morning, salient points included:

  • The Bank has not purchased government bonds for some time but is prepared to scale up purchases.
  • Authorized deposit-taking institutions continue to draw on the Term Funding Facility, with total drawings to date of A$15bn.
  • Economic conditions have stabilized and the downturn has been less severe than earlier expected.
  • Retail spending has picked up in response to the decline in infections and easing of restrictions.
  • The nature and speed of the economic recovery remain highly uncertain, however.
  • This uncertainty has led to caution amongst households and businesses, which could further dampen the speed of any economic recovery.
  • Importantly, the Board is committed to support jobs, incomes, and businesses and to make sure that Australia is well placed for the recovery.
  • Also, the Board will maintain this accommodative approach for as long as needed.
  • The Board will not increase the cash target rate until progress is made towards full employment and it is confident that inflation will be sustainable within the 2-3% target band.

In response to the hold and comments within the rate statement, the Aussie Dollar jumped to $0.69699.

With negative sentiment towards COVID-19 and the latest border shutdown, the upside was brief. At the time of writing, the Aussie Dollar was down by 0.10% to $0.69659.

There was no evidence of alarm from the statement over the latest border shutdown. When considering the uncertainty over consumer and business spending, this could become an issue in the coming weeks…

AUD/USD 07/07/20 Daily Chart

What Lies Ahead?

Ultimately, the markets and the Aussie Dollar have been here before. As the likes of the FED continue to plow money into the system and governments deliver fiscal support, hopes are that the latest spikes are just blips.

In reality, however, the very fact that the numbers of new COVID-19 cases are hitting new daily highs must be a concern.

Governments and central banks have delivered plenty and some may have little left to offer. That does, therefore, suggest that the worst is yet to come.

Optimism has continued to drive demand for riskier assets. May and June’s economic indicators supported that view to a point. Compered to pre-pandemic levels, however, some key economic indicators remain deep in the red.

A 2nd wave would likely cause far greater economic devastation. The reason simply being that consumers, if not governments, would be far more cautions a 2nd time around.

For the Australian economy, this would have a far more adverse effect than on manufacturing-sector driven economies. Though, in the event of a 2nd wave of lockdowns, few economies would be able to avoid another meltdown. With the influence of commodity prices on the Aussie Dollar, it would be a double blow… Back in March, we saw the Aussie Dollar back at sub-$0.60 levels.

If the U.S continues to battle against China over HK and trade, things could deteriorate quite rapidly.

For now, the RBA’s optimism is good enough to deliver support and optimism. If the spread of the virus does continue, however, expect the Aussie Dollar and commodities to take a dive.

When considering the state of the global economy, an Aussie Dollar on the cusp of $0.70 levels looks rich with risks tilted to the downside…

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.

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.

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.

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.

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.

European Equities: A Week in Review – 27/06/20

The Majors

It was a bearish week for the European majors in the week ending 26th June. The DAX30 and EuroStoxx600 fell by 1.96% and by 1.95% respectively, with the CAC40 seeing a 1.40% loss in the week.

Only partially reversing gains from the previous week, the majors remained in positive territory for the current month.

It was a mixed week for the bulls. Economic data provided the majors with much-needed support, while geopolitics and COVID-19 updates weighed in the week.

Looking at the COVID-19 numbers in the week, there was a marked increase in the number of new cases in the U.S and globally. Germany had also reportedly reintroduced lockdown measures in one district. At a difficult time for the global economy, Trump added to the market angst, with talk of tariffs on EU goods.

On the monetary policy front, the ECB expanded its support for the global financial markets, easing some of the pain. The ECB announced a new repo program, whereby it would offer collateralized EUR loans to central banks outside of the Eurozone.  This had reversed losses across the majors on Thursday.

On Friday, however, the focus was primarily on COVID-19 updates from the U.S, as a number of states hit pause on reopening.

The Stats

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

Key stats included June’s prelim private sector PMIs for France, Germany, and the Eurozone. June and July business and consumer sentiment figures from Germany were also in focus.

Economic data was skewed heavily to the positive, with the PMIs and sentiment supporting a quicker than expected economic recovery.

The Eurozone’s Composite PMI rose from 31.9 to 47.5, supported by a return to expansion across France’s private sector.

While business and consumer sentiment improved at the turn of the quarter, there is still a long way to go before recovering to pre-pandemic levels, however…

From the U.S

It was a mixed week on the day data front…

Durable goods and core durable goods orders rebounded in May, with private sector activity contracting at a lesser pace in June.

Jobless claims failed to impress, however, with initial jobless claims rising by 1.48m in the week ending 19th June. Economists had forecast a 1.3m increase.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen rose by 1.97% to buck the trend in the week. Daimler slid by 4.22%, with Continental and BMW saw more modest losses of 0.49% and 1.08% respectively.

It was another bearish week for the banking sector. Commerzbank and Deutsche Bank fell by 2.52% and by 2.43% respectively.

Lufthansa rose by 1.29% in the week to partially reverse a 3.82% slide from the previous week.

From the DAX30, the story of the week was WIRECARD AG once more. Following a 73.96% slump last week, WIRECARD AG ended the week down by 94.15%.

From the CAC, it was another mixed week for the banks. BNP Paribas fell by 2.29% to buck the trend. Credit Agricole and Soc Gen saw relatively modest gains of 0.12% and 0.77% respectively.

It was also a mixed week for the French auto sector, with Peugeot rising by 3.75%, while Renault fell by 0.76%.

Air France-KLM followed the previous week’s 5.49% slide with a 12.23% tumble, with Airbus ending the week down by 10.14%.

On the VIX Index

It was another week in the red, with the VIX seeing red for 5 weeks out of 6. In the week ending 26th June, the VIX fell by 1.11% to end the week at 34.73. In the previous week, the VIX had fallen by 2.69%.

Market sentiment towards COVID-19 and geopolitics weighed on the U.S equity markets in the week. Trump’s threat of rolling out tariffs on the EU, including the UK, came as U.S member states reported spikes in new COVID-19 cases.

By the end of the week, a number of U.S states even hit pause in reopening as new cases hit record highs.

On the economic data front, it was a mixed bag. While the private sector continued to recover, the weekly jobless claims figures suggested that the labor market recovery could be more drawn out.

The S&P500 ended the week down by 2.86%, with the Dow and NASDAQ falling by 3.31% and by 1.90% respectively.

VIX 27/06/20 Daily Chart

The Week Ahead

It’s a busier week ahead on the Eurozone economic calendar. Key stats include private sector PMIs out of Italy and Spain and finalized numbers for France, Germany, and the Eurozone.

Expect Italy and the Eurozone’s PMIs to garner the greatest interest on Wednesday and Friday.

Service sector activity and consumer spending remain key to an economic rebound. That also brings May’s consumer spending figures for France and Germany into focus on Tuesday and Wednesday.

German unemployment figures for June on Wednesday will also be key. Any deterioration in employment conditions would be market negative

We would expect Eurozone unemployment figures on Thursday to have a muted impact on the majors.

From elsewhere

Private sector PMI’s out of China and consumer sentiment, ISM PMIs, and labor market numbers from the U.S will also influence…

Outside of numbers, expect particular attention to COVID-19 news and any further chatter on tariffs to remain key drivers.

Asia-Pacific Markets: Hong Kong Down Ahead of New US Sanctions on China; Australia’s Quantas Plunges Over 9%

The major Asia Pacific stock indexes closed mostly higher on Friday with shares in Hong Kong bucking the trend. Investors primarily followed the lead set by Wall Street on Thursday.

U.S. shares traded sideways to lower throughout the session before surging during the last hour of trading. Earlier gains were capped by concerns over the spread of COVID-19 in the U.S., but late in the session prices rose on the back of bank stocks after U.S. banking regulators rolled back post-crisis restrictions to allow banks to increase investments in certain funds and vehicles.

On Friday, Japan’s Nikkei 225 Index settled at 22512.08, up 252.29 or 1.13%. Hong Kong’s Hang Seng Index finished at 24549.99, down 231.59 or -0.93% and South Korea’s KOSPI Index closed at 2134.65, up 22.28 or +1.05%.

China’s Shanghai Index settled at 2979.55, up 8.93 or +0.30% and Australia’s S&P/ASX 200 Index finished at 5904.10, up 86.40 or +1.49%.

Banks Rally on Banking Regulation Rollback

The Office of the Comptroller of the Currency on Thursday approved changes to the so-called Volcker Rule, which prevented banks from investing their own money in hedge funds and private equity funds. The regulators also scrapped a requirement that lenders set aside cash for derivatives trades between different affiliates of the same firm.

Fed Places New Restrictions on Banking Industry

The U.S. Federal Reserve on Thursday placed new restrictions on the banking industry after its annual stress test found that several banks could get close to minimum capital levels in scenarios related to the coronavirus pandemic. As a result, banks have to suspend share buyback programs and leave dividend payments at current levels for the third quarter.

Australia’s Quantas Airways Shares Plummet Over 9%

In corporate news, shares of Australian airlines Qantas Airways plummeted 9.07% after the firm announced it had completed a share placement to institutional investors worth approximately 1.36 billion Australian Dollars ($936.83 million).

On Thursday, the firm had announced plans to reduce its pre-crisis workforce by at least 6,000 roles as part of steps to recover from the coronavirus pandemic.

Hong Kong Shares Slide as Pandemic, US Sanction Pressures Weigh

Hong Kong shares ended lower on Friday, after U.S. lawmakers moved closer to sanctioning people and companies they consider China’s accomplices in curbing the city’s autonomy, while new coronavirus outbreaks globally also soured the sentiment.

Investors turned cautious as Chinese authorities could pass that security law during a June 28-30 meeting, amid mixed signals in global markets, CHIEF Securities said in a note.

Financial markets in mainland China were shut for the Dragon Boat Festival, while Hong Kong markets were closed for it on Thursday, when global equities slipped on worries of further coronavirus outbreaks across the world.

The U.S. Senate passed a legislation on Thursday that would sanction people or companies it deems in support of China’s attempt to restrict Hong Kong’s autonomy, pushing back against Beijing’s new security law for the city.

U.S. Imposes Visa Restrictions on Chinese Officials Over Hong Kong Autonomy

U.S. Secretary of State Mike Pompeo said on Friday the United States was imposing visa restrictions on Chinese Communist Party officials believed responsible for restricting freedoms in Hong Kong.

“Today, I am announcing visa restrictions on current and former CCP officials who are believed to be responsible for, or complicit in, undermining Hong Kong’s high degree of autonomy,” Pompeo said in a statement, which did not name those targeted.

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

U.S States Hit Pause on Reopening. This is Bad News All Round…

The Inevitable

News hit the wires at the end of the week of a number of U.S states hitting pause on reopening plans.

There had been a clear message from the U.S administration that the reopening must continue at whatever cost, including loss of life…

Trump’s message was followed to the T and the devastation has been clear for both the markets and voters to see.

Sadly, there is no distraction tactic that the administration can adopt to conceal a harsh reality.

Looking at the news hitting the wires over the day, there is a far gloomier picture for the markets to consider…

According to CNN, there was a record single-day 37,077 jump in new coronavirus cases reported in the U.S on Thursday. The number is actually a conservative one. We have 45,503 new cases reported, taking the total number of cases to 2,504,676.

That is the highest increase since a 45,566 spike back on Friday, 24th April.

It’s therefore not surprising that a number of U.S states have hit pause on reopening plans. The safety of American citizens must be of greater importance than an economic reboot…

Economic Implications

This week’s PMI numbers from the U.S and elsewhere pointed to a speedier economic recovery than initially anticipated.

While a number of central banks delivered optimism, FED Chair Powell and the FED was somewhat more cautious.

As far as the FED Chair was concerned, it is all about the COVID-19 numbers and little else near-term.

The FED has continued to deliver support and, when considering the pause on reopening, more support may be on the cards.

Weekly jobless claims figures failed to fall to sub-1m levels, let alone sub-300k levels. This pause on reopening could have two quite dire implications for the U.S labor market and economic recovery.

Firstly, businesses will be far more cautious 2nd time around, which means rehiring at a snail’s pace, at best.

Secondly, and perhaps more significantly, will be consumer sentiment. We have seen consumer confidence pick up of late. This latest curveball may well test the resilience of consumers.

It may not be so quick to recover from another pullback in consumption…

Economic Data and the Market Reaction

At the time of writing, the Dow mini was down by 131 points, as the markets began to respond to the news.

The loss is minor when considering some of the most populous states in the U.S reporting record highs in new cases on Thursday. These include California, Florida, and Texas.

According to CNN, these three states account for 27.4% of the 328m people living in the U.S.

Worse yet, for an economy looking to rebound, are the age brackets affected. The latest reports reveal that 18 to 44 years olds are being affected at a high rate.

Inevitably, this will translate into a pullback in private sector activity, assuming that the upward trend continues.  Then there is the likely higher rate of infections as a result of a more mobile age group being infected.

Will it mean a nationwide lockdown? It may be a bitter pill for the U.S administration to swallow. If it is an eventual outcome then even the FED may not be able to prop up the markets.

At some point, the FED will need to let the markets just recalibrate. It will be a costly experience for a central bank that just jumped into the U.S corporate bond market…

The Greenback

At the time of writing, the Greenback was down by just 0.05% to 97.382, with the commodity currencies also seeing a limited downside.

The Aussie Dollar was down by 0.15% to $0.6877, with the Loonie down by 0.12% to C$1.3654.

If the spread widens, expect far more significant moves to come. The markets will need to get past the noise and consider the near-term to medium-term implications.

Looking at crude oil prices, WTI’s 0.93% fall to 38.36 is also a minor fall…

Expect the news wires and COVID-19 to now be at the forefront of market drivers. How the U.S government responds will also be key and passing the buck is not going to be palatable…

If we see the 2nd wave accelerate across the country, will the Greenback remain the safe haven of choice?

As long as the FED continues to assure its support and ensure liquidity, then yes and that could really hurt the Dollar bears…

What may ultimately be more alarming, however, is the actual number of infections and related deaths…

European Equities: A Quiet Economic Calendar Puts COVID-19 and Geopolitics Back in Focus

The Majors

It was a relatively bullish day for the European majors on Thursday, which steadied after Wednesday’s sell-off.

The CAC40 rose by 0.97% to lead the way, with the DAX30 and EuroStoxx600 gaining 0.69% and 0.71% respectively.

It wasn’t plane sailing, however, with the majors recovering from early losses and a late dip back into the red.

Concerns over the continued rise in new COVID-19 cases weighed on the majors on the day, while central bank action eased the pain. There was also the fresh threat of a U.S – EU trade war for the markets to fret about.

On Thursday, it was the ECB that came to the rescue. The ECB announced a new repo program, whereby it would offer collateralized EUR loans to central banks outside of the Eurozone.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Germany’s GfK Consumer Climate figures for July were in focus ahead of the European session.

According to the GfK Consumer Survey,

  • The GfK has a forecast of -9.6 for July 2020, up by 9 points from June’s revised 18.6 points.
  • Both economic and income expectations, as well as propensity to buy, are on the rise.
  • While sentiment improved, the July figure was still the 3rd weakest value on record.

Looking at the components:

  • Consumer income expectations jumped by 18.9 points to 8.5 points to sit above its long-term average of zero points.
  • Income expectations improved, with the indicator rising by 12.3 points to 6.6 points. In spite of the rise, the indicator was still 39 points below its value this time last year.
  • The improved income expectations led to a 13.9 point rise in the propensity to buy indicator to 19.4. Compared with this time last year, the indicator was down by more than 34 points, however.

From the U.S

It was a busier day on the economic calendar. Key stats included the weekly jobless claims figures and core durable goods orders.

In May, core durable goods increased by 4%, partially reversing an 8.2% decline from April. Economists had forecast a 2.5% increase.

The weekly jobless claims were more disappointing, however. In the week ending 19th June, initial jobless claims rose by 1.48m, following a 1.508m increase in the week prior. Economists had forecast a 1.3m increase.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector on Thursday, recovering most of Wednesday’s losses. Continental and Daimler led the way, with rallying by 3.45% and 3.61% respectively. BMW and Volkswagen were close behind, with gains of 3.04% and 3.02% respectively.

It was also a bullish day for the banks, with Deutsche Bank and Commerzbank rallying by 5.03% and by 3.70% respectively.

WIRECARD AG slumped by a whopping 74.9% on the day…

From the CAC, the banks found much-needed support on Thursday. Soc Gen led the way, rallying by 3.46%. BNP Paribas and Credit Agricole rose by 1.93% and 3.01% respectively.

The French auto sector also saw green, with Peugeot and Renault ending the day with gains of 1.43% and 2.27% respectively.

It was less impressive for Air France-KLM and Airbus SE, however, which rose by 0.75% and by 1.51% respectively.

On the VIX Index

It was back into the red for the VIX. Partially reversing a 7.87% gain from Wednesday, the VIX fell by 4.79% on Thursday to end the day at 32.22.

The U.S major indexes bounced back from losses earlier in the day, with banks amongst the front runners. News of regulators easing post-global financial crisis restrictions delivered the upside on the day.

The S&P500 and Dow rose by 1.10% and by 1.18% respectively, with the NASDAQ gaining 1.09%.

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no major stats due out of the Eurozone to provide the majors with direction.

A lack of stats will leave the majors in the hands of COVID-19 news and any further chatter from the U.S on trade tariffs…

From the U.S

It’s a busier day ahead. May’s inflation and personal spending figures are due out along with finalized consumer sentiment numbers for June.

Barring particularly dire numbers, however, COVID-19 and geopolitics will likely remain key drivers on the day.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 193,646 to 9,697,910. On Wednesday, the number of new cases had risen by 174,860. The daily increase was higher than Wednesday’s rise and 169,995 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 1,264 new cases on Thursday, which was down from 1,463 new cases on Wednesday. On the previous Thursday, just 787 new cases had been reported.

From the U.S, the total number of cases rose by 42,480 to 2,501,653 on Thursday. On Wednesday, the total number of cases had risen by 38,253. On Thursday, 18th June, a total of 25,576 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 61.5 points, while the Dow was down by 140 points.

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

Fed Puts Restrictions on Bank Dividends After Stress Test Results Reveal Pandemic-Related Issues

Heightened volatility could be the theme in Friday’s U.S. stock market session if the after-market activity is an indication. Stocks being pressured during the after-market trade are Nike, Facebook, American Airlines, Wells Fargo and MGM Resorts. However, the entire market remains at risk due to a major announcement by the Federal Reserve that may erase most of Thursday’s banking sector gains.

In the cash market on Thursday, the benchmark S&P 500 Index settled at 3083.76, up 33.43 or +1.11%. The blue chip Dow Jones Industrial Average rose 25745.60, up 299.66 or +1.19% and the technology-driven NASDAQ Composite ended at 10017.00, up 107.83 or +1.19%.

Thursday Recap:  FDIC Decision Boosts Bank Shares

Stocks ended a volatile session on Thursday with solid gains as investors cheered regulation rollbacks for the big banks. The Federal Deposit Insurance Commission said it would allow banks to more easily make large investments into funds such as venture capital funds. Also banks will not have to set aside cash for derivatives traders between different affiliates of the same firm, potentially freeing up more capital.

“When we think about a recession of the magnitude that we have, there’s going to be some credit write-offs by banks,” said Art Hogan, chief market strategist at National Securities. “The fact that they’re going to have more working capital makes markets breathe a sigh of relief.”

Bank of America, JP Morgan Chase, Citigroup and Wells Fargo all rose more than 3%. Goldman Sachs also gained 4.6% while Morgan Stanley advanced 3.9%. Shares of major banks jumped to their highs of the day in the final hour of trading as investors looked ahead to the Federal Reserve releasing stress-test results for the major banks. Those results were released after the close.

Fed:  Some Banks Could Be Stressed in Pandemic

Bank stocks slumped after the close of regular trading in New York after the Federal Reserve put new restrictions on the U.S. banking industry Thursday after its annual stress test found that several banks could get uncomfortably closer to minimum capital levels in scenarios tied to the coronavirus pandemic.

The Fed said in a release that big banks will be required to suspend share buybacks and cap dividend payments at their current level for the third quarter of this year. The regulator also said it would only allow dividends to be paid based on a formula tied to a bank’s recent earnings.

Shares of Wells Fargo, which had climbed during the day, gave back some of those gains, falling 1.6%. JPMorgan Chase slipped 0.9%.

Futures Market Opening

If bank stocks led the major U.S. stock indexes higher on Thursday then they could put some pressure on the indexes on Friday, given the Fed announcements. The impact of the Fed’s decision could also put some pressure on shares in Asia and Europe early in the session.

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