European Equities: U.S – China Tensions ahead of Trump’s News Conference to Test the Rally

Economic Calendar:

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was a 5th consecutive day in the green for the DAX30, as the European majors continued to eat into the current year losses.

The CAC40 led the way once more rallying by 1.76%, with the DAX30 and EuroStoxx600 rising by 1.06% and 1.64% respectively.

Economic data from the Eurozone had a muted impact on the majors as the markets continued to respond to the EU recovery plan as lockdown measures ease.

From the U.S, the markets found solace in the U.S weekly jobless claims in spite of another 2m jump in initial jobless claims. While coming in at 2.123m for the week ending 22nd May, it was lower than in recent weeks.

Ultimately, however, the upbeat reaction to the recovery plan muted market jitters over rising tensions between the U.S and China.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. Key stats included May’s prelim inflation figures for Germany and Spain.

For Spain, consumer prices fell by 1.0%, year-on-year, following a 0.7% decline in April. The Harmonised Consumer Price Index fell by 0.9%, year-on-year, also following a 0.7% fall in April.

Things were not much better out of Germany, with consumer prices falling by 0.1%, month-on-month. In April, consumer prices had risen by 0.4%.

From the U.S, it was a busy day on the economic calendar.

According to 2nd estimate GDP figures, the economy contracted by 5.0% in the 1st quarter, revised down from a 1st estimate 4.8%.

Core durables goods orders slid by 7.4%, with durable goods orders tumbling by 17.2%. While dire, both sets of figures came in ahead of forecasts.

Pending home sales figures were also disappointing. In the month of April, sales tumbled by 21.8% versus a forecasted 15% slide. In March, pending home sales had slumped by 20.8%. Since late April, however, housing sector activity has rebounded, limiting the impact of the numbers.

The markets have moved on from the 1st quarter and April figures, considered to have been the economic bottom.

For the markets, the weekly jobless claims figures garnered greater interest on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen and Daimler slid by 3.72% and by 3.19% respectively to lead the way down. BMW and Continental saw more modest losses of 2.29% and 1.17% respectively.

It was a mixed day for the banks, however. Deutsche Bank declined by 2.13%, while Commerzbank closed out the day with a 0.70% gain.

Deutsche Lufthansa continued to find support from the easing of lockdown measures and bailout. Following on from a 1.74% gain on Wednesday, a 2.86% rally delivered a 4th consecutive day in the green for the week.

From the CAC, it was also a mixed day for the banking sector on Thursday. BNP Paribas and Soc Gen fell by 0.12% and by 2.71% respectively, while Credit Agricole eked out a 0.03% gain.

The auto sector returned to the red, however, with Peugeot and Renault falling by 1.10% and by 2.67% respectively.

Air France-KLM rose by a further 0.61% following Wednesday’s 2.81% gain, while Airbus SE fell by a further 1.65%.

On the VIX Index

It was a 1st day in the green from 4 on Thursday. Reversing a 1.39% fall from Wednesday, the VIX rose by 3.51% to end the day at 28.6.

The upside on the day came in response to the rising tensions between the U.S and China. On Thursday, the U.S President announced that he would unveil measures against China at Friday’s news conference.

This announcement came in the wake of China approving the security bill for Hong Kong. On Wednesday, Secretary of State Pompeo had stated that HK was no longer autonomous with China.

The U.S majors had been in positive territory before Trump’s announcement that led to a pullback late in the session.

VIX 29/05/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include April retail sales figures from France and Germany and May’s prelim inflation figures for the Eurozone.

2nd estimate GDP numbers are also due out of France along with May’s prelim inflation figures from France, Italy, and Spain.

With the markets looking beyond the 1st quarter and April, the stats should have a muted impact on the majors today.

From the U.S, it’s also a relatively busy day ahead on the economic calendar. Once again, the lion’s share of the stats is for April that should have a limited impact later in the day.

Any downward revisions to finalized consumer sentiment figures could draw some attention.

FED Chair Powell will also have some influence late in the session. Expect the Trump news conference to be the main event of the day…

Ahead of the European open, the majors were under pressure in anticipation of sanctions and more on China…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 151.5 points, with the Dow down by 111 points.

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

European Equities: Futures Point to another Surge Driven by Economic Optimism

Economic Calendar:

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was yet another bullish day for the European majors on Wednesday, with the CAC40 rising by 1.79% to lead the way.

The DAX30 and EuroStoxx600 saw more modest gains of 1.33% and 0.24% respectively.

While there were no material stats to provide direction on the day, it was the EU’s COVID-19 recovery plan the spurred a 4th consecutive day in the green for the DAX30.

The EU Commission announced plans to roll out a larger than anticipated €750bn to support the EU economic revival.

Unsurprisingly Italy and Spain are to get the largest slices of the pie, which will be in the form of grants and loans.

U.S – China tensions did pin back the majors late in the day, though the COVID-19 economic recovery plan was of far greater influence.

The Stats

It was a quiet quiet day on the Eurozone economic calendar on Wednesday. There were no material stats for the markets to focus on mid-week.

Outside of the numbers, the ECB was in action, however. ECB President Lagarde spoke before the release of the ECB’s Financial Stability Review.

In spite of the Buoyant mood across the European majors, Lagarde delivered a somber appraisal of the Eurozone economy and outlook.

Lagarde stated that the economic contraction is likely to be between the ECB’s base case and worst-case scenarios, while also acknowledging that it is hard to forecast just how badly the economy has been affected.

The ECB’s Financial Stability Review also delivered some concerns for the markets to brush aside.

According to the May review, key vulnerabilities include:

  • Tightening of financial conditions.
  • Significant increase in debt burdens.
  • Weaker bank intermediation capacity and profitability.
  • Liquidity concerns among vulnerable non-banks.

Please follow the link to access the Financial Stability Review.

From the U.S, there were no material stats to influence the European majors later in the day.

The Market Movers

For the DAX: It was another particularly bullish day for the auto sector on Tuesday. Daimler surged by 10.68% to lead the way, with BMW and Continental rallying by 6.94% and by 6.43% respectively. Volkswagen saw a more modest 3.93% gain on the day.

It was another bullish day for the banks. Deutsche Bank and Commerzbank rallied by 5.28% and by 6.62% respectively.

Deutsche Lufthansa saw a relatively modest 1.74% gain after 6.51% and 7.92% gains on Monday and Tuesday.

From the CAC, it was a bullish day for the banking sector on Wednesday, following on from Tuesday’s gains. BNP Paribas rallied by 8.82% to lead the way, with Credit Agricole and Soc Gen gaining by 5.30% and 6.56% respectively.

The auto sector also found strong support. Peugeot rose by 4.91%, while Renault surged by 17.47. Added support for Renault came from an announcement by Nissan to rebuild its relationship with Renault.

Air France-KLM gained a further 2.81% following Tuesday’s 10.64% breakout, while Airbus SE fell by 2.67%.

On the VIX Index

It was a 3rd consecutive day in the red on Wednesday. Following on from a 0.53% decline on Tuesday, the VIX fell by 1.39% to end the day at 27.6.

The downside on the day came in spite of rising tensions between the U.S and China and a gloomy economic environment.

Support for the U.S majors on the day continued to come from the easing of lockdown measures and hopes of a continued economic recovery.

From a market perspective, both fiscal and monetary policy support will likely continue until the employment conditions recover.

On Wednesday, the S&P500 rose by 1.48%, with the Dow and NASDAQ gaining 2.21% and 0.77% respectively.

VIX 28/05/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Prelim May inflation figures are due out of Spain and Germany later today.

We don’t expect the numbers to have a material impact on the majors, however, with the markets anticipating inflation to remain under pressure.

From the U.S, April’s durable goods and core durable goods orders and 2nd estimate GDP figures are due out, along with jobless claims numbers.

Barring deviation from 1st estimates, expect the jobless claims to have the greatest impact on risk appetite and the Dollar. Can the markets stomach another 2m jump in claims?

Away from the economic calendar, the markets will be looking towards Capitol Hill for the U.S government’s reaction to China’s new HK securities law.

While the rise in tensions between the U.S and China remains negative for risk sentiment, COVID-19 news and updates should provide further support. Expect any further progress towards a COVID-19 vaccination to deliver further support.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 110,221 to 5,788,503. On Tuesday, the number of new cases had risen by 95,878. The daily increase was higher than both Tuesday’s rise and 89,941 new cases from the previous Wednesday.

France, Germany, Italy, and Spain reported 1,892 new cases on Wednesday, which was up from 1,535 new cases on Tuesday. On the previous Wednesday, 3,225 new cases had been reported.

From the U.S, the total number of cases rose by 20,392 to 1,745,803 on Wednesday. On Tuesday, the total number of cases had risen by 19,185. On Wednesday 20th May, a total of 21,774 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 142.5 points, with the Dow up by 185 points.

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

European Equities: The ECB and the EU Commission in Focus alongside China

Economic Calendar:

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was another bullish day for the European majors on Tuesday, with the CAC40 rising by 1.46% to lead the way.

The DAX30 and EuroStoxx600 weren’t close behind, with gains of 1.00% and 1.08% respectively.

More positive economic data out of Germany, the continued easing of lockdown measures, and progress towards a COVID-19 vaccine were the key drivers.

On the vaccine front, a number of U.S firms were making progress, with Novavax reporting that human trials had commenced. With Novavax moving onto human trials and Moderna reporting positive results last week, there was a boost for travel and bank stocks.

Once more, the markets brushed aside tensions between the U.S and China.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Tuesday. Germany was back in the limelight, however, with June’s GfK Consumer Climate figures in focus.

According to the GfK report:

  • The Consumer Climate Index rose by 4.2 points to -18.9 for June 2020.
  • It was noted that, in spite of the uptick, the GfK stood at its 2nd lowest level ever recorded.
  • As expected, the easing of lockdown measures delivered support, while concerns over job losses weighed.
  • A 9.8 point fall in the propensity to save provided support, after a surge in the sub-index in April.
  • Consumer’s economic expectations improved, with the sub-index rising by 11 points to -10.4.
  • Income expectations rose after a record fall in the previous month, though a 13.6 point rise to -5.7 remains a whopping 63 points below the same time last year…

From the U.S

May consumer confidence figures provided direction later in the day.

The CB Consumer Confidence Index rose from a revised 85.7 to 86.6. It wasn’t the most spectacular rise, with consumers’ assessment of current business and labor market conditions weighing. The Present Situation Index fell from 71.1 to 73.0. By contrast, the Expectations Index increased from 94.3 to 96.9.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector on Tuesday. Continental led the way, rallying by 4.43%. BMW, Daimler, and Volkswagen saw more modest but solid gains of 2.53%, 2.31%, and 2.42% respectively.

It was also a particularly bullish day for the banks. Deutsche Bank surged by 8.46%, with Commerzbank rallying by 6.06%. 

Deutsche Lufthansa was amongst the front runners once more, rallying by 6.51% off the back of 7.92% jump on Monday.

The top performers on the DAX were Deutsche Bank and Deutsche Lufthansa on Tuesday.

From the CAC, it was a bullish day for the banking sector on Tuesday, following on from Monday’s gains. Credit Agricole rallied by 7.99% to lead the way, with BNP Paribas and Soc Gen gaining 7.25% and 7.02% respectively.

The auto sector also found strong support, with Peugeot and Renault rallying by 5.76% and by 6.62% respectively.

Air France-KLM led the way, however, surging by 10.64%, while Airbus SE rose by 7.11%.

On the VIX Index

It was 2nd consecutive day in the red on Tuesday. Following on from a 4.64% fall on Friday, the VIX fell by 0.53% to end the day at 28.0. It was a U.S public holiday on Monday.

The minor loss on the day came in spite of a post-memorial day equity market rally, with jitters over China limiting the downside on the VIX.

On Tuesday, the S&P500 rose by 1.23%, with the Dow and NASDAQ ending the day with gains of 2.17% and 0.17% respectively.

The Day Ahead

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

While there are no stats, ECB President Lagarde is due to speak in the early part of the European session. Lagarde’s speech precedes the ECB’s financial stability review that is due out later in the session.

Key takeaways will be how the ECB sees the economic recovery and whether further support is on the horizon. All of this is assuming that the ECB’s calls for fiscal policy support are met with the rollout of the COVID-19 recovery fund.

The timing is apt considering the fact that the European Commission is due to launch a coronavirus recovery fund later today. This is to be coupled with a longer-term European Union budget that will likely raise some eyebrows.

Once more, some member states will likely be miffed at having to support less prosperous nations adversely affected by the virus. The focus today will be on the size and what strings are attached and what component is likely to reach the pockets of voters…

From the U.S, there are no material stats to provide the majors with direction late in the session.

Away from the calendar, geopolitics and the latest COVID-19 news and numbers will also have influence throughout the day. Early in the day, jitters over China dragged the futures into the red.

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 95,878 to 5,678,282 On Monday, the number of new cases had risen by 83,824. The daily increase was higher than both Monday’s rise and 94,189 new cases from the previous Tuesday.

France, Germany, Italy, and Spain reported 1,535 new cases on Tuesday, which was up from 747 new cases on Monday. On the previous Tuesday, 2,848 new cases had been reported.

From the U.S, the total number of cases rose by 19,185 to 1,725,411 on Tuesday. On Monday, the total number of cases had risen by 19,790. On Tuesday 19th May, a total of 20,688 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 52 points, with the Dow down by 20 points.

S&P 500 Technical Analysis: Is A Blow-Off Top Setting Up

Our research team has become increasingly concerned that the US Fed support for the markets has pushed price levels well above true valuation levels and that a risk of a downside price move is still rather high.  Recently, we published a research article highlighting our Adaptive Dynamic Learning (ADL) predictive modeling system results showing the US stock market was 12% to 15% overvalued based on our ADL results.  Today, Tuesday, May 26, the markets opened much higher which extends that true valuation gap.

We understand that everyone expects the markets to go back to where they were before the COVID-19 virus event happened – and that is likely going to happen over time.  Our research team believes the disruption of the global economy over the past 70+ days will result in a very difficult Q2: 2020 and some very big downside numbers.  Globally, we believe the disruption to the consumer and services sector has been strong enough to really disrupt forward expectations and earnings capabilities.  We’ve been warning our friends and followers to be very cautious of this upside price trend as the Fed is driving prices higher while the foundations of the global economy (consumers, services, goods, and retail) continue to crumble away.

Our biggest concern is a sharp downside rotation related to overvalued markets and sudden news or a new economic event that disrupts forward expectations.  Obviously, Q2 data will likely be a big concern for many, yet we believe something else could act as a catalyst for a reversion event.  Possibly global political news?  Possibly some type of extended collateral damage related to the global economy? Possibly something related to earnings expectations going forward through the rest of 2020 and beyond?  We believe things are not “back to normal” at this stage of the recovery and we believe the markets are moderately over-extended at this time.

ES ADL PREDICTIVE MODELING WEEKLY CHART

This Weekly ES (S&P500 E-Mini Futures) chart shows our ADL predictive modeling system’s expected future price level targets which suggest the current market price level is 12% to 15% (or more) above these target levels. Remember, the ADL system uses a custom price mapping technology that is designed to identify “price/technical DNA markers” within historical data – then attempt to map out future price level activity and track the highest probable outcomes of these price DNA markers.  The objective of this research tool is to show us what type of price activity is highly probable based on historical data and predictive modeling research.  This unique trigger on the ES chart consisted of 5 historical DNA markers and suggests a future probability of 70% to 87% regarding future price target levels.

One aspect of our research while using the ADL predictive modeling system and our other tools it the concept of “price anomalies”.  These are rallies or sell-offs that extend beyond support or resistance levels and when price levels trend away from ADL predicted target levels.  We created the term “price anomaly” and explain it to our members as “some external force is pushing the price above or below the projected target level.  Once this force abates or diminishes, the price will likely move, very quickly, to levels near the ADL predicted target levels.”.

Currently, the US Fed is engaging in a moderate support effort for the US stock market and it is reportedly buying $5+ billion a day in bonds and assets.  Although it may seem impossible to fight the fed, we believe the markets (like nature) are almost impossible to fool and control.  We believe that price will react to market conditions and that future price rotation (both up and down) will continue to be more volatile than many traders expect.

CUSTOM VOLATILITY INDEX WEEKLY CHART

This Custom Volatility Index chart highlights the extremely low levels recently established by the COVID-19 market sell-off.  These new low levels have created the deepest sell-off levels on this chart in 20+ years.  It has also established a new, highly volatile, downward price channel that our researchers are following to help us determine where resistance will likely be found.

We believe a new downward price rotation is setting up for some time in the near future that will establish a tighter price channel and assist us in determining when and where the ultimate price bottom will setup and complete.  With the VIX levels still near 27~29, we are certain that volatility has not decreased even though price levels have attempted a solid recovery over the past 8+ weeks.

CUSTOM SMART CASH INDEX WEEKLY CHART

This Weekly Custom Smart Cash Index chart highlights the true function of price within the US stock market and highlights the overall weakness still at play within the current markets.  Even though the NQ has rallied to near all-time highs, the Smart Cash Index is showing the broader market is still rather weak and that recent price activity has stalled into a sideways/flag formation.  The broader market buying that took place near the end of March 2020 and throughout April 2020 has stalled.  The Fed became the market for the past 8+ weeks and as the Fed diminishes its activity, it will be up to the markets to manage trends and future expectations going forward.

Our researchers are concerned that a sudden breakdown in the Smart Cash index may prompt a bigger downside price move in the global markets.  Our research team has continued to issue warnings to our members to run protective stops on any open long positions, to properly size trades to avoid excessive risks and to properly hedge your trading using precious metals, miners, and Bonds.  In short, these risks are very real.  You can still make a profit trading the long side of the markets, but we suggest that you take all the necessary steps to protect your trades.

CUSTOM US STOCK MARKET INDEX WEEKLY CHART

This last Weekly Custom US Stock Market chart highlights two very important levels related to our Fibonacci Price Amplitude Arcs.  These arcs represent critical Fibonacci support and resistance levels that arc across time and price levels.  It is important to understand these levels will present very real inflections in price – at least we expect them to create price inflections.

Currently, there is the YELLOW Fibonacci price arc that is acting as resistance near the current highs and the MAGENTA Fibonacci price arc that is much longer-term.  This longer-term Fibonacci price arc may be stronger than the current shorter-term arc.  Our researchers believe the current Fibonacci arc levels on this chart will prompt price to “flag out” in a sideways price channel before potentially breaking downward.

As we continue to watch for weakness across these charts and trends, we urge skilled technical traders to be prepared for a sharp spike in volatility over the next 4+ weeks.  It appears we are only 2 to 4+ weeks away from reaching these major price inflection points.  Currently, we believe a downside move is the most probable outcome based on our ADL predictive modeling system results as well as the technical patterns seen on these charts.

Overall, we believe the increased volatility levels in the US stock market will present some incredible trading opportunities for technical traders.  Big swings, near-perfect technical patterns and setups, quick profits, and broader sector rotations.  This is the type of market where skilled technical traders can really enjoy a target-rich environment.  We just have to be selective in how we determine when to enter trades and to not take excessive risks.

Please take a moment to visit www.TheTechnicalTraders.com to learn more.  I can’t say it any better than this…  I want to help you create success while helping you protect and preserve your wealth – it’s that simple.

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

European Equities: Futures Point Northwards as the Markets Attempt to Shrug of China Concerns

Economic Calendar:

Tuesday, 26th May

GfK German Consumer Climate (Jun)

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was a bullish start to the week for the European majors on Monday, with the DAX30 rising by 2.87% to lead the way.

The CAC40 and EuroStoxx600 weren’t far behind, with gains of 2.15% and 1.47% respectively.

Positive economic data out of Germany, a continued easing of lockdown measures, and particularly low new COVID-19 cases provided support.

The combination of fiscal stimulus, progress towards a coronavirus vaccine, and monetary policy contributed to the optimism on Monday.

Jitters over rising tensions between the U.S and China and news of China’s proposal for a Security Law for HK took a back seat on the day.

The Stats

It was a relatively busy day on the Eurozone economic calendar on Monday. German 2nd estimate GDP figures and May’s IFO Business Climate Index were in focus early in the session.

According to Destatis,

  • The economy contracted by 1.9%, year-on-year, and by 2.2% quarter-on-quarter, which was in line with the 1st estimate.
  • This was the largest decrease since the GFC and the 2nd largest since Germany’s unification.
  • Household consumption slid by 3.2%, quarter-on-quarter.
  • Global fixed capital formation in machinery and equipment was down by as much as 6.9%.
  • Final consumption expenditure of general government (+0.2%) and gross capital fixed formation in construction (+4.1%) had a stabilizing effect.
  • Foreign trade weighed, with exports down by 3.1% from the 4th quarter, while imports increased by 0.7%.

On the business confidence front, there was some improvement, with the IFO Business Climate Index rising from 74.3 to 79.2.

According to the May IFO survey,

  • The IFO Business Climate Index rose from 74.2 to 79.5 in May, despite companies assessing their current situation as slightly worse.
  • In spite of the negative sentiment towards the current economic climate, the outlook did improve significantly.
  • While the outlook did improve due to an easing in lockdown measures, the Expectations Index remained well below pre-U.S – China trade war levels.
  • In May, the Business Expectations Index rose from 69.4 to 80.1, while the Current Assessment sub-Index slipped from 79.4 to 78.9.

Looking at the Business Climate Index:

  • The Manufacturing Business Climate Index jumped off the back of a more optimistic outlook.
  • Service sector firms saw an improvement in both outlook and sentiment to support a rise in the Business Climate Index.

From the U.S, there were no material stats with the U.S markets closed for the day.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Monday. Continental and Daimler rose by 1.64% and by 0.83% to lead the way. BMW and Volkswagen saw more modest gains of 0.12% and 0.24% respectively.

It was a bullish day for the banks, however. Deutsche Bank rallied by 2.75%, with Commerzbank gaining 0.97%.

Deutsche Lufthansa jumped by 7.92% on Monday to lead the way on the DAX. News of Lufthansa resuming flights to as many as 20 destinations by mid-June provided support. This was coupled with expectations of a government bailout that may come close to €10bn.

From the CAC, it was a relatively bullish day for the banking sector on Monday, following on from Friday’s gains. Credit Agricole rallied by 2.00% to lead the way, with BNP Paribas and Soc Gen gaining 1.87% and 0.84% respectively.

It was a bullish day for the auto sector, with Peugeot and Renault rallying by 6.20% and 4.44% respectively.

Air France-KLM also found support, rallying by 4.55%, while Airbus SE jumped by 8.51%.

On the VIX Index

The U.S markets were closed on Monday.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to Germany’s GfK Consumer Climate figures for June.

With lockdown measures easing across Germany and the EU, consumer confidence will need to see a pickup to support the majors.

Sentiment towards the job market and the outlook for hiring will be key. Hopes of a pickup in economic activity should support a more positive outlook.

From the U.S, expect U.S consumer confidence figures for May to also provide direction later in the session.

Outside of the numbers, any chatter from Beijing or Washington will also influence. The latest COVID-19 news and numbers will also need to be market positive. All of this ahead of Wednesday COVID-19 recovery fund talks.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 83,824 to 5,582,404. On Sunday, the number of new cases had risen by 101,608. The daily increase was lower than Sunday’s rise, while higher than 82,564 new cases from the previous Monday.

France, Germany, Italy, and Spain reported just 747 new cases on Monday, which was down from 1,470 new cases on Sunday. On the previous Monday, 1,916 new cases had been reported.

From the U.S, the total number of cases rose by 19,790 to 1,706,226 on Monday. On Sunday, the total number of cases had risen by 20,190. On Monday 18th May, a total of 22,231 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 9.5 points, with the Dow up by 267 points.

European Equities: Geopolitics and the Economic Calendar in Focus

Economic Calendar:

Monday, 25th May

German GDP (Q1) 2nd Estimate

German IFO Business Climate Index (May)

Tuesday, 26th May

GfK German Consumer Climate (Jun)

Thursday, 28th May

Spanish HICP (YoY) (May) Prelim

German CPI (MoM) (May) Prelim

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was a mixed end to the week for the European majors on Friday.

The DAX30 eked out a 0.07% gain, while the CAC40 and EuroStoxx600 slipped by 0.02% and by 0.03% respectively.

Through the early part of the day, the European majors had been in the deep red before a recovery in the late part of the session.

Rising tensions between the U.S and China and news of China’s proposal for a Security Law for HK weighed on risk appetite.

Chinese move to impose greater control over HK came as the U.S looked to ban Chinese companies from U.S exchanges. A new security law would flout agreements to allow HK to remain independent of Beijing.

Unsurprisingly, Trump responded to the move by China, stating that the U.S would react strongly to such a move.

While the rise in tension between the U.S and China was certainly negative, a late recovery transpired nonetheless.

Market sentiment towards the continued easing of lockdown measures and the downward trend in new COVID-19 cases provided support.

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Friday. There were no material stats from the Eurozone or the U.S to provide the majors with direction on the day.

A lack of stats left the majors firmly in the hands of geopolitical risk on the day.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Friday. Continental rallied by 2.28% to lead the way, with BMW rising by 0.34%. Daimler and Volkswagen saw more modest gains of 0.03% and 0.14% respectively.

It was a mixed day for the banks, however. Deutsche Bank fell by 0.49%, while Commerzbank rose by 0.36%.

Deutsche Lufthansa fell by a further 2.96% following Thursday’s 3.76% slide to pin back the DAX30.

From the CAC, it was a relatively bullish day for the banking sector on Friday, following Thursday’s losses. Credit Agricole rose by 0.58% to lead the way, with BNP Paribas and Soc Gen gaining 0.32% and 0.29% respectively.

It was a mixed day for the auto sector, however, with Peugeot rising by 1.19%, while Renault slid by 2.86%.

Air France-KLM saw yet more red, with a 2.62% decline. Airbus SE ended the day down by 1.12%.

On the VIX Index

It was 3rd day in the red for the week on Friday. Partially reversing a 5.50% gain from Thursday, the VIX fell by 4.64% to end the day at 28.2.

The mixed sentiment at the end of the week left the U.S majors relatively flat on the day.

Negative sentiment towards China’s plans for an HK Security Law and rising tensions between the U.S and China pinned back the majors.

With the U.S planning to pass a bill to make it challenging for Chinese companies to list on U.S exchanges, there is plenty of uncertainty ahead.

Optimism over the continued easing of lockdown measures provided support on the day, though not enough to deliver another breakout.

On Friday, the S&P500 and NASDAQ rose by 0.24% and by 0.43% respectively, while the Dow slipped by 0.04%.

VIX 25/05/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Key stats include 2nd estimate GDP numbers for the 1st quarter and May’s IFO Business Expectations figures from Germany.

Barring a marked downward revision from 1st estimate, the IFO numbers will likely have a greater influence on the day.

The markets are now looking for consumers and businesses to turn the corner from April. May’s stats will need to reflect a pickup in both consumer and business confidence to support a pickup in economic activity.

Outside of the numbers, expect any chatter from Beijing and Washington to also influence, though the U.S markets are closed for the day.

The continued downward trend in new coronavirus cases across France, Germany, Italy, and Spain is positive, however. Europe’s easing of lockdown measures is supported by the COVID-19 numbers that should deliver a pickup in economic activity.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 100,455 to 5,497,427. On Saturday, the number of new cases had risen by 99,013. The daily increase was higher than both Saturday’s rise and 83,321 new cases from the previous Sunday.

France, Germany, Italy, and Spain reported 1,470 new cases on Sunday, which was down from 1,658 new cases on Wednesday. On the previous Sunday, 2,500 new cases had been reported.

From the U.S, the total number of cases rose by 20,190 to 1,686,436 on Sunday. On Saturday, the total number of cases had risen by 21,152. On Sunday 17th May, a total of 19,891 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 84.5 points, with the Dow up by 69 points.

European Equities: A Week in Review – 23/05/20

The Majors

It was a bullish week for the European majors in the week ending 22nd May. The DAX30 rallied by 5.82% to lead the way, with the CAC30 and EuroStoxx600 gaining 3.90% and 3.63% respectively.

Economic data took a back seat once again, as the markets continued to focus on the ongoing easing of lockdown measures.

Across the most affected EU member states, the downward trend in new cases continued, in spite of the easing of confinement measures.

It wasn’t plane sailing, however, with rising tensions between the U.S and China weighing on risk appetite in the week.

Ultimately, however, the markets have lived through Trump’s negotiation styles before. Actually ousting Chinese companies from U.S exchanges would have significant implications… Let’s not forget the Investment Dollars that the likes of Apple have plowed into China over the years…

Trump will also need to be cognizant of the fact that the U.S Presidential Election is not too far off.

On the Fiscal policy front, progress towards an EU COVID-19 recovery fund also supported the demand for the majors in the week.

The Stats

It was a relatively busy week on the Eurozone economic calendar. It was a week of 2-halves on the economic data front.

In the 1st half of the week, May’s ZEW economic sentiment figures for the Eurozone and Germany and Eurozone consumer confidence figures were in focus.

Both sets of numbers provided support, with the economic sentiment in Germany seeing a marked pickup.

The upside came as the downward trend in new coronavirus cases continued and lockdown measures eased.

In the 2nd half of the week, the focus shifted to May’s prelim private sector PMIs for France, Germany, and the Eurozone.

While we didn’t see a rebound similar to that seen in China, the survey did suggest that the worst may have passed.

This may have been good enough in the week but what the market expects, in terms of the pace of the economic recovery, remains to be seen.

FED Chair Powell spoke early in the week of the U.S economic recovery, delivering a reality check for the markets. Powell forecasted a recovery by the end of 2021. That’s some way off and the forecast assumes no hiccups along the way…

From the U.S, while it was a relatively busy week on the calendar, it was the weekly jobless claims figures that tested the majors.

Another 2.438m jump in initial jobless claims in the week ending 15th May was certainly not needed.

On the positive, however, the FED reassured the markets that there was plenty of ammo left to lead the U.S economy back to growth.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Continental and Daimler surged by 10.42% and 11.11% respectively to lead the way. BMW and Volkswagen weren’t far behind, with gains of 7.71% and 9.10% respectively.

It was a particularly bullish week for the banking sector. Commerzbank jumped by 14.88%, with Deutsche Bank rallying by 12.25%.

Lufthansa also found support, rallying by 7.53% to reverse a 5.10% loss from the previous week.

From the CAC, it was a relatively bullish week for the banks. BNP Paribas and Soc Gen rallied by 7.69% and by 6.03% respectively, while Credit Agricole saw a more modest 1.17% gain.

It was a mixed week for the French auto sector, however. Peugeot rose by 0.61%, while Renault fell by 1.37%.

Air France-KLM saw more losses, with an 8.06% slide following on from a 6.91% fall from the previous week. Airbus recovered most of the previous week’s 12.06% tumble, with a 10.06% gain.

On the VIX Index

It was back into the red for the VIX in the week ending 22nd May, with the VIX falling by 11.70%. Partially reversing a 13.97% gain from the previous week, the VIX ended the week at 28.2.

A continued easing of lockdown measures and assurances by the FED of continued support overshadowed rising tensions between the U.S and China.

In the early part of the week, news of positive results from early trials for a COVID-19 vaccine also supported riskier assets.

The S&P500 ended the week up by 3.20%, with the Dow and NASDAQ gaining by 3.29% and by 3.44% respectively.

VIX 23/05/20 Weekly Chart

The Week Ahead

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

Expect market focus to remain on business and consumer confidence and then post-April consumption figures.

A continued pickup in both consumer and business confidence in Germany would certainly be a boost. What impact the rise in tension between the U.S and China will have remains to be seen, however, and could be a curveball in the week ahead.

Other stats include 2nd estimate GDP figures for the 1st quarter and prelim inflation figures for May. These should have limited influence.

From elsewhere, we will expect the weekly jobless claims figures from the U.S to continue to be a market area of focus. In the week ahead, however, we will also be eyeing the May consumer confidence figures from the U.S.

With the U.S economy fueled by consumption, are consumers buying into the Trump gamble of opening up the economy?

The markets will also need to monitor the daily COVID-19 numbers.

European Equities: Geopolitics and the ECB’s Monetary Policy Meeting Minutes in Focus

The Majors

The risk pendulum swung against the European majors on Thursday, with the DAX falling by 1.41% to lead the way.

Things were not much better for the CAC40 and EuroStoxx600, which ended the day with losses of 1.15% and 0.75% respectively.

While economic data came in better than had been forecast, rising tension between the U.S and China was back in focus.

News of the House of Representatives passing a Bill to oust Chinese companies from U.S exchanges weighed on risk sentiment on Thursday.

Things are unlikely to get better anytime soon and the latest move brings into doubt the viability of the phase 1 trade agreement.

The Stats

It was a busy day on the Eurozone economic calendar on Thursday. May’s prelim private sector PMIs for France, Germany, and the Eurozone was in focus early in the European session.

France’s Manufacturing PMI increased from 31.5 to 40.3, with the Services PMI rising from 10.2 to 29.4. Economists had forecast a Manufacturing PMI of 36.1 and Services PMI of 27.8.

Germany’s Manufacturing PMI rose from 34.5 to 36.8, with the Services PMI increasing from 16.2 to 31.4. Economists had forecast a Manufacturing PMI of 39.2 and Services PMI of 26.6.

For the Eurozone, the Manufacturing PMI rose from 33.4 to 39.5, with the Services PMI increasing from 12.0 to 28.7.

The Eurozone’s Composite PMI came in at 30.5, which was up from an April 13.6 and ahead of a forecasted 25.0.

According to the prelim May survey:

  • The Composite Output Index rose from 13.6 to a 3-month high 30.5.
  • Service and manufacturing sector activity hit 3-month and 2-month highs respectively.
  • While service sector activity contracted at a slower pace, it was still the 3rd steepest decline on record. Social distancing and lockdown measures continued to weigh on businesses including hotels, restaurants, and travel tourism.
  • Jobs continued to be cut at an unprecedented rate, with both sectors contributing.
  • Inflows of new business fell by the 3rd greatest extent ever recorded. In spite of this, the smallest decline in new business in 3 months suggested that the downturn had bottomed out.

From the U.S

Prelim private sector PMIs and the weekly jobless claims were also in focus later in the day.

In the week ending 15th May, U.S initial jobless claims rose by 2.438m, following on from a 2.687m jump in the week prior. Economists had forecast 2.4m claims for the week.

Philly FED numbers also failed to impress, with the Philly FED’s Manufacturing Index rising from -46.7 to -43.1 in May. Economists had forecast a rise to -41.5.

In May, the Services PMI rose from 26.7 to 36.9, with the Manufacturing PMI increasing from 36.1 to 39.8.

The markets had hoped for a marked improvement in service sector activity. With job losses continuing to rise in May, an easing in lockdown measures failed to spur the services sector into action…

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Daimler fell by 1.18% to lead the way down. BMW and Continental and weren’t far behind, with losses of 0.60% and 0.62% respectively. Volkswagen bucked the trend, with a 0.15% gain.

It was a bearish day for the banks, however. Deutsche Bank fell by 1.23%, with Commerzbank sliding by 2.55%.

Deutsche Lufthansa slid by 3.76%, following Wednesday’s 7.74% rally.

From the CAC, it was a bearish day for the banking sector on Thursday. Credit Agricole slid by 3.03% to lead the way down. BNP Paribas and Soc Gen ended the day with losses of 1.86% and 2.53% respectively.

It was also a bearish day for the auto sector, after Wednesday’s partial recovery. Peugeot fell by 1.94%, with Renault falling by 1.52%.

Air France-KLM continued to see red, with a 1.25% decline, with Airbus SE ending the day with a 0.73% loss.

On the VIX Index

It was only a 2nd day in the green out of 6 on Thursday. Partially reversing an 8.32% fall from Wednesday, the VIX rose by 5.50% to end the day at 29.5.

Market jitters over rising tension between the U.S and China returned as the U.S government looked to push Chinese companies out of the international market.

Economic data added to the market angst, with the initial jobless claims seeing another sizeable jump in the week ending 15th May.

On Thursday, the S&P500 fell by 0.78%, with the Dow and NASDAQ seeing losses of 0.41% and 0.97% respectively.

VIX 22/05/20 Daily Chart

The Day Ahead

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

Through the early part of the day, chatter from Beijing and Washington and COVID-19 news updates will remain the key drivers.

Later in the day, with no material stats due out of the U.S, expect the markets to be wary of any Trump Twitter account. The U.S markets are closed on Monday, so the majors could come under pressure later in the session…

On the monetary policy front, the ECB monetary policy meeting minutes are due out and will need to assure continued support. There is also the issue of an EU COVID-19 aid package…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 106,139 to 5,188,800. On Wednesday, the number of new cases had risen by 99,724. The daily increase was higher than both Wednesday’s rise and 93,671 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 1,976 new cases on Thursday, which was down from 2,856 new cases on Wednesday. On the previous Thursday, 4,230 new cases had been reported.

From the U.S, the total number of cases rose by 28,089 to 1,620,080 on Thursday. On Wednesday, the total number of cases had risen by 21,408. On Thursday, 14th May, a total of 26,397 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 58.5 points, with the Dow up by 96 points.

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

Economic Calendar:

Wednesday, 20th May

German PPI (MoM) (Apr)

Eurozone Core CPI (YoY) (Apr) Final

Eurozone CPI (MoM) (Apr) Final

Eurozone CPI (YoY) (Apr) Final

Eurozone Consumer Confidence Flash

Friday, 22nd May

French Manufacturing PMI (May) Prelim

French Services PMI (May) Prelim

German Manufacturing PMI (May) Prelim

German Services PMI (May) Prelim

Eurozone Manufacturing PMI (May) Prelim

Eurozone Markit Composite PMI (May) Prelim

Eurozone Services PMI (May) Prelim

The Majors

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

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

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

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

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

The Stats

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

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

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

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

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

The Market Movers

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

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

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

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

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

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

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

On the VIX Index

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

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

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

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

VIX 20/05/20 Daily Chart

The Day Ahead

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

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

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

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

The Latest Coronavirus Figures

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

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

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

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

European Equities: EU Fiscal Stimulus News and Economic Data in Focus

Economic Calendar:

Tuesday, 19th May

German ZEW Current Conditions (May)

German ZEW Economic Sentiment (May)

Eurozone ZEW Economic Sentiment (May)

Wednesday, 20th May

German PPI (MoM) (Apr)

Eurozone Core CPI (YoY) (Apr) Final

Eurozone CPI (MoM) (Apr) Final

Eurozone CPI (YoY) (Apr) Final

Eurozone Consumer Confidence Flash

Friday, 22nd May

French Manufacturing PMI (May) Prelim

French Services PMI (May) Prelim

German Manufacturing PMI (May) Prelim

German Services PMI (May) Prelim

Eurozone Manufacturing PMI (May) Prelim

Eurozone Markit Composite PMI (May) Prelim

Eurozone Services PMI (May) Prelim

The Majors

It was a bullish start to the week for the European majors. The DAX30 rallied by 5.67% to lead the way, with the CAC40 and EuroStoxx600 seeing gains of 5.16% and 5.10% respectively.

There were no material stats from the Eurozone to rock the boat. Positive sentiment towards the ongoing easing of lockdown measures drove demand for the majors.

Crude oil prices were also on the rise, as optimism towards a pickup in economic activity overshadowed an expected long road to economic recovery.

Adding to the upside on the day was positive news on the effectiveness of a COVID-19 vaccination. This would allow governments to ease lockdown measures at a more aggressive pace.

On the monetary policy front, comments from FED Chair Powell also eased concerns that the FED has little left to offer. Powell assured the markets that the FED still has plenty in the tank to support the economy.

The Stats

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

There were also no stats from the U.S to influence later in the day.

The Market Movers

For the DAX: It was a particularly bullish day for the auto sector on Monday. Daimler and Volkswagen rallied by 10.26% and by 8.31% to lead the way. BMW and Continental weren’t far behind, with gains of 7.77% and 8.05% respectively.

Hopes of a pickup in economic activity also delivered support to the beleaguered banks. Deutsche Bank rallied by 9.34%, with Commerzbank gaining 8.12%.

Deutsche Lufthansa found strong support. An effective COVID-19 vaccination would allow governments to open borders and lead to a marked increase in air passenger volumes. Deutsche Lufthansa rallied by 8.11%.

From the CAC, it was a bullish day for the banking sector on Monday. Soc Gen rallied by 10.27%, with BNP Paribas and Credit Agricole ending the day with gains of 7.82% and 6.11% respectively.

It was also a bullish day for the auto sector. Peugeot and Renault rallied by 6.56% and 8.70% respectively. French autos found support on Monday, with French finance minister Bruno Le Maire speaking of government plans to support the sector.

Air France-KLM saw a relatively modest 5.48% gain, while Airbus SE surged by 12.23% only to be outdone by TechnipFMC (+13.88%) on the day.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Monday. Following on from a 2.21% fall on Friday, the VIX slid by 8.12% to end the day at 29.3.

The markets put concerns over U.S and China tensions aside on the day, with the focus primarily on COVID-19 news updates.

A continued easing of lockdown measures, the downward trend in new cases, and news of promising early results for a vaccination delivered a boost. Surging crude oil prices on a shift in sentiment towards demand had set up the major indexes in the early part of the day.

On Monday, the S&P500 rose by 3.15%, with the Dow and NASDAQ seeing gains of 3.85% and 2.44% respectively.

VIX 19/05/20 Daily Chart

The Day Ahead

It’s a busier day ahead on the Eurozone economic calendar. May’s ZEW Economic Sentiment figures for Germany and the Eurozone are due out later today.

Expect any pickup in sentiment towards the economy to provide support.

From the U.S, stats are limited to April housing sector numbers that will likely have a muted impact on the majors.

On the geopolitical risk front, updates from the EU Finance Ministers’ virtual meeting will provide direction. Any talk of a sizeable stimulus package would be positive for the majors.

Downside risks remain, however, with any chatter from Beijing or Washington on trade likely to be test support.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 82,564 to 4,888,188. On Sunday, the number of new cases had risen by 83,321. The daily increase was lower than Sunday’s rise, while higher than 76,701 new cases on the previous Monday.

France, Germany, Italy, and Spain reported 1,916 new cases on Monday, which was down from 2,500 new cases on Sunday. On the previous Monday, 5,374 new cases had been reported.

From the U.S, the total number of cases rose by 22,231 to 1,549,895 on Monday. On Sunday, the total number of cases had risen by 19,891 On Monday, 11th May, a total of 18,196 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 20 points, with the Dow up by 11 points.

European Equities: COVID-19 Updates Deliver Support, with Geopolitics also in Focus

Economic Calendar:

Tuesday, 19th May

German ZEW Current Conditions (May)

German ZEW Economic Sentiment (May)

Eurozone ZEW Economic Sentiment (May)

Wednesday, 20th May

German PPI (MoM) (Apr)

Eurozone Core CPI (YoY) (Apr) Final

Eurozone CPI (MoM) (Apr) Final

Eurozone CPI (YoY) (Apr) Final

Eurozone Consumer Confidence Flash

Friday, 22nd May

French Manufacturing PMI (May) Prelim

French Services PMI (May) Prelim

German Manufacturing PMI (May) Prelim

German Services PMI (May) Prelim

Eurozone Manufacturing PMI (May) Prelim

Eurozone Markit Composite PMI (May) Prelim

Eurozone Services PMI (May) Prelim

The Majors

It was a bullish end to a bearish week for the European majors. The DAX30 rose by 1.24% to lead the way, while the CAC40 and EuroStoxx600 saw more modest gains of 0.11% and 0.47% respectively.

Economic data out of China on Friday provided the European majors with much-needed support. Figures released ahead of the European open showed that industrial production rose by 3.5% in April, year-on-year. Economists had forecast a 1.5% rise. This was the only positive, however, with fixed-asset investment and retail sales continuing to slide.

On the geopolitical front, rising tensions between the U.S and China did limit the upside for the majors on the day.

The news of the U.S government implementing steps to prevent the shipment of chips to Huawei pinned back the majors late in the day.

In response, China threatened to target U.S companies with bans should the U.S government proceed with the blocking of chip supply.

The rise in escalation came after a lull mid-week that had allowed the markets to focus on economic data and central bank chatter.

While chatter from Beijing and Washington weighed, hopes of a pickup in economic activity provide support as lockdown measures eased further.

A slight uptick in new coronavirus cases over the week was not enough to force governments to reverse the easing of measures.

The Stats

It was a busy day on the Eurozone economic calendar on Friday. Key stats included 1st quarter GDP numbers for Germany and the Eurozone.

For Germany, the economy contracted by 2.2% in the 1st quarter, according to 1st estimate figures, which was in line with forecasts.

According to 2nd estimate figures, the Eurozone’s economy contracted by 3.8% in the 1st quarter, which was in line with 1st estimates.

It was a different story for the year-on-year figures, however. Germany’s economy contracted by 1.9%, which was worse than a forecasted contraction of 1.6%. In contrast, the Eurozone’s economy contracted by 3.2%, coming in ahead of a 1st estimate 3.3%.

Finalized French and Italian April inflation figures and Eurozone trade data for March had a muted impact on the day.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Continental rallied by 3.49% to lead the way, with Volkswagen gaining 2.87%. While Daimler also saw green, with a 1.05% rise, BMW slid by 2.63% to buck the trend on the day.

It was also a bearish day for the banks, however. Deutsche Bank slid by 3.18%, with Commerzbank falling by 2.44%.

Deutsche Lufthansa slid by 4.56%, reversing a 4.84% rally from Thursday.

From the CAC, it was a mixed day for the banking sector following Thursday’s losses. BNP Paribas and Credit Agricole rose by 1.18% and 1.67% respectively, while Soc Gen fell by 0.66%.

It was a bullish day for the auto sector, however, with Peugeot and Renault seeing gains of 2.90% and 0.83% respectively.

Air France-KLM rose by 1.71%, while Airbus SE fell by 1.14 at the end of the week.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Friday. Following on from a 7.57% fall on Thursday, the VIX fell by 2.21% to end the day at 31.9.

Rising tension between the U.S and China and some particularly dire economic data had given the VIX a boost early in the day.

A rebound across the U.S equity markets, however, led to a reversal through the 2nd half of the day.

While economic data was particularly disappointing, hopes of a pickup in economic activity supported the U.S majors on Friday.

On Friday, the S&P500 rose by 0.39%, with the Dow and NASDAQ seeing gains of 0.25% and 0.79% respectively.

VIX 18/05/20 Daily Chart

The Day Ahead

It’s a quiet start to the week on the Eurozone economic calendar. There are no material stats from the Eurozone or the U.S to provide the majors with direction.

A lack of stats will leave the European majors in hands of COVID-19 news, geopolitics, and any chatter from EU member states on fiscal support.

A downward trend in new coronavirus cases and a continued easing of lockdown measures supported in the futures early on.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 75,594 to 4,797,827. On Saturday, the number of new cases had risen by 104,393. The daily increase was lower than Saturday’s rise and 78,198 new cases on the previous Sunday.

France, Germany, Italy, and Spain reported 2.500 new cases on Sunday, which was down from 3,490 new cases on Saturday. On the previous Sunday, 3,549 new cases had been reported.

From the U.S, the total number of cases rose by 18,838 to 1,526,611 on Sunday. On Saturday, the total number of cases had risen by 25,939. On Sunday, 10th May, a total of 20,329 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 146.5 points, with the Dow up by 197 points.

European Equities: A Week in Review – 16/05/20

The Majors

It was a bearish week for the European majors in the week ending 15th May. The CAC30 slid by 5.98% to lead the way down, with the DAX30 and EuroStoxx600 falling by 4.03% and by 3.76 respectively.

For the CAC40 and DAX30, it had been 4 consecutive days in the red before support kicked in on Friday.

Market concerns over a possible 2nd wave of the coronavirus, dovish chatter from FED Chair Powell, and rising tensions between the U.S and China delivered the losses.

Economic data from the Eurozone and the U.S certainly did not help in the week, however, with more records broken.

At the end of the week, the majors did find support. The upside came in spite of some dire stats and the U.S threat to cut the supply of chips to Huawei. In response, China announced that it would ban doing business with U.S marquee companies should the U.S go through with its threat.

Better than expected industrial production figures out of China contributed to the upside on Friday. It wasn’t enough to prevent the worst weekly decline since March, however.

The Stats

It was a relatively busy week on the Eurozone economic calendar. Through the 1st half of the week, economic data was limited to April industrial production figures for the Eurozone. While better than forecasts, an 11.30% slide certainly didn’t help the mood.

The markets then had to wait until Friday for 1st estimate GDP numbers for Germany and 2nd estimate figures for the Eurozone.

In the 1st quarter, the German economy contracted by 2.2%, which was in line with forecasts. Year-on-year, however, the economy contracted by 1.9%, which was worse than a forecasted 1.6% contraction.

For the Eurozone, an upward revision to the year-on-year contraction to 3.2% was the only positive stat of the week.

From the ECB, the Economic Bulletin on Thursday reminded the markets of the ECB’s view on the economy and outlook. There was nothing positive for the more optimistic market participants to cling onto…

Out of the U.S, another 2.9m surge in initial jobless claims and a record 16.4% month-on-month fall in retail sales added to the doom and gloom.

On Friday, China reported a 3.5% rise in industrial production, which provided much-needed support at the end of the week.

The Market Movers

From the DAX, it was a bearish week for the auto sector. BMW and Daimler tumbled by 8.96% and 10.37% respectively to lead the way down. Continental and Volkswagen saw more modest losses of 6.16% and 5.57% respectively.

It was a particularly bearish week for the banking sector. Commerzbank tumbled by 11.13%, with Deutsche Bank sliding by 9.42%.

Lufthansa also struggled, with a 4.62% slide on Friday, leading to a 5.10% loss for the week.

From the CAC, it was also a bearish week for the banks. Soc Gen tumbled by 11.30%, with BNP Paribas and Credit Agricole sliding by 7.91% and by 6.20% respectively.

Things were not much better for the French auto sector, with Peugeot tumbling by 14.22%. Renault saw a more modest 0.29% loss for the week.

Air France-KLM and Airbus saw another week of heavy losses, with the pair sliding by 6.91% and by 12.06% respectively.

On the VIX Index

It was back into the green for the VIX in the week ending 15th May. Partially reversing a 24.76% slide from the previous week, the VIX rose by 13.97% to end the week at 31.9.

Economic data and rising tension between the U.S and China coupled with negative central bank chatter delivered the upside.

For the U.S equity markets, 3 consecutive days in the red did the damage before support kicked in on Thursday.

In spite of particularly dire stats and a U.S – China exchange of threats, hopes of a marked pickup in economic activity limited the upside for the VIX.

Lockdown measures continued to ease, which led to a marginal increase in the number of new coronavirus cases in the week.

The S&P500 ended the week down by 2.26%, with the Dow and NASDAQ falling by 2.65% and by 1.17% respectively.

VIX 16/05/20 Weekly Chart

The Week Ahead

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

Through the 1st half of the week, key stats include May ZEW Economic sentiment figures for Germany and the Eurozone and Eurozone consumer confidence figures.

For the majors to respond, there will need to be a marked pickup in consumer confidence.

The markets will then need to look ahead to prelim May private sector PMIs due out on Friday. These numbers will be particularly influential on risk sentiment at the end of the week.

Through May, governments eased lockdown measures that should provide the private sector with much-needed support.

While a slower pace of contraction across the manufacturing sector is likely, expect the services PMIs to garner plenty of attention…

From elsewhere, we will expect the weekly jobless claims figures from the U.S to continue to be a market area of focus.

Ahead of the numbers, the FOMC minutes on Wednesday will also influence, as will prelim May private sector PMIs and  May’s Philly FED Manufacturing Index numbers on Thursday.

On the geopolitical risk front, there’s the U.S and China to consider, while the markets will also need to monitor the daily COVID-19 numbers.

From the EU, Finance Ministers are scheduled to have a virtual meeting at the start of the week. Talks of a more sizeable stimulus package will be a must for the majors to avoid another weekly spill.

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

Economic Calendar:

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

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

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

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

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

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

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

The Stats

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

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

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

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

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

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

The Market Movers

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

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

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

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

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

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

On the VIX Index

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

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

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

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

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

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

VIX 15/05/20 Daily Chart

The Day Ahead

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

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

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

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

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

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

The Latest Coronavirus Figures

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

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

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

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

European Equities: Will U.S Jobless Claims Figures Deliver a 4th Consecutive Day in the Red?

Economic Calendar:

Thursday, 14th May

German CPI (MoM) (Apr) Final

Spanish CPI (YoY) (Apr) Final

Spanish HICP (YoY) (Apr) Final

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

It was another bearish day for the European majors on Wednesday, with the CAC40 sliding by 2.85% to lead the way down. The DAX30 and EuroStoxx600 weren’t far behind, with losses of 2.56% and 1.94% respectively.

There was plenty for the markets to consider mid-week, all of which contributed to the downside on the day.

Economic data was on the lighter side, however, leaving the majors in the hands of Powell, corporate earnings, COVID-19, and China.

A reported rise in cases in both China and South Korea led to a shift in sentiment towards government plans to ease lockdown measures this week.

On the corporate earnings front, banks were in focus as Commerzbank and ANB AMRO disappointed on Wednesday.

Tensions between China and the U.S didn’t help. On Tuesday, news had hit the wires of proposed legislation to roll out sanctions on China. The U.S is requesting China to deliver a summary of events that led to the COVID-19 outbreak….

Later in the European session on Wednesday, Fed Chair Powell’s scheduled speech also garnered plenty of attention. The FED Chair’s Powell added to the market angst on the day, by talking of a possibly prolonged recession.

The Stats

It was another quiet day on the Eurozone economic calendar on Wednesday. Eurozone industrial production figures for March failed to move the dial, in spite of better than forecasted figures.

In March, industrial production tumbled 11.30%, following a 0.1% decline in February. Economists had forecast a 12.0% decline.

According to Eurostat,

  • The production of durable consumer goods slumped by 26.3%, capital goods by 15.9%, and intermediate goods by 11.0%.
  • There were also declines in the production of energy (-4.0%)) and non-durable consumer goods (-1.6%).
  • By member state, Italy (-28.4%), Slovakia (-20.3%), and France (-16.4%) reported the heaviest declines.
  • Ireland (+15.5%) and Greece and Finland (both +0.9%) reported rises in industrial production.
  • Year-on-year, industrial production fell by 12.9% across the Eurozone in March.

From the U.S, April wholesale inflation figures had a muted impact on the majors later in the day, with the markets focused on Powell.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector on Wednesday. Continental led the way, tumbling by 6.86%. Daimler and Volkswagen weren’t far behind, with losses of 4.91% and 4.85% respectively. BMW saw a more modest 3.28% loss on the day.

It was also a bearish day for the banks. Deutsche Bank slid by 4.45%, while Commerzbank tumbled by 7.09%. 1st quarter earnings sank Commerzbank on the day.

Deutsche Lufthansa fell by a modest 1.20%.

From the CAC, the banking sector saw more red on Wednesday. BNP Paribas fell by 4.74%, with Credit Agricole and Soc Gen seeing losses of 2.56% and 4.76% respectively.

It was also a bearish day for the auto sector. Peugeot slid by 5.97%, while Renault slipped by 0.51%.

The prospects of a deep recession added further pressure on travel stocks. Air France-KLM and Airbus SE fell by 2.57% and by 3.16% respectively.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX, which rose by 6.78% on Wednesday. Following on from a 19.84% surge on Tuesday, the VIX ended the day at 35.3.

Concerns over the U.S government reopening the economy too early and dovish chatter from FED Chair Powell weighed on the U.S equity markets mid-week.

There was also the rise in tension between the U.S and China to add to the market angst on the day.

On Wednesday, the S&P500 fell by 1.75%, with the Dow and NASDAQ declining by 2.17% and by 1.55% respectively.

VIX 14/05/20 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Finalized April inflation figures are due out of Germany and Spain along with the ECB’s Economic Bulletin.

With the markets expecting inflationary pressures to vanish, expect the ECB Economic Bulletin to garner greater interest on the day.

From the U.S, the weekly jobless claims figures will also have a material impact on the majors.

Expect another surge in jobless claims to weigh heavily on risk appetite.

Outside of the numbers, COVID-19 updates and chatter from Beijing and Washington will also need monitoring.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 79,361 to 4,416,823. On Tuesday, the number of new cases had risen by 81,022. Last Wednesday, there had been an 87,960 increase in new cases.

France, Germany, Italy, and Spain reported 3,225 new cases on Wednesday, which was down from 4,176 new cases on Tuesday. On the previous Wednesday, 9,651 new cases had been reported.

From the U.S, the total number of cases rose by 18,315 to 1,426,889 on Wednesday. On Tuesday, the total number of cases had risen by 22,740. On Wednesday, 6th May, the total new number of cases had risen by 20,715.

In the futures markets, at the time of writing, the Dow was up by 50 points.

European Equities: Futures Point to the Red as COVID-19 Jitters Linger

Economic Calendar:

Wednesday, 13th May

Eurozone Industrial Production (MoM) (Mar)

Thursday, 14th May

German CPI (MoM) (Apr) Final

Spanish CPI (YoY) (Apr) Final

Spanish HICP (YoY) (Apr) Final

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

It was a mixed day for the European majors on Tuesday, with the EuroStoxx600 rising by 0.26% to lead the way. The CAC40 and DAX40 struggled, however, with losses of 0.39% and 0.05% respectively.

There were no stats from the Eurozone to provide direction, leaving the majors in the hands of market sentiment towards COVID-19.

Concerns over a 2nd wave of the pandemic delivered a 2nd consecutive day in the red for the CAC40 and DAX30.

Reports of a rise in new cases from China, South Korea, and Germany spooked the markets. The upward trend in new COVID-19 cases was as a result of an easing in lockdown measures.

The Stats

It was another quiet day on the Eurozone economic calendar on Tuesday. There were no material stats from the Eurozone to provide the majors with direction on the day.

From the U.S, April inflation figures added to the negative sentiment later in the day. The markets had anticipated softer inflation and they got it.

The annual core rate of inflation eased from 2.10% to 1.60%. Economists had forecast an annual core rate of inflation of 1.70%. Fears over deflation added to the market angst on Tuesday.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. BMW, Continental, and Daimler slid by 2.82%, by 2.87%, and by 2.81% respectively to lead the way down. Volkswagen wasn’t far behind, with a 2.23% loss on the day.

It was a mixed day for the banks. Deutsche Bank fell by 0.64%, while Commerzbank rose by 0.34%.

Deutsche Lufthansa declined by 1.26% to reverse a 0.62% gain from Monday.

From the CAC, the banking sector struggled on Tuesday. BNP Paribas fell by 1.00%, with Credit Agricole and Soc Gen seeing losses of 0.83% and 1.67% respectively.

It was also a bearish day for the auto sector. Peugeot and Renault slid by 2.47% and by 2.88% respectively.

Air France-KLM slipped by 0.54%, partially reversing a 2.83% gain from Monday, while Airbus SE slid by 6.02%.

On the VIX Index

A run of 3 consecutive days came to an abrupt end for the VIX, which surged by 19.84% on Tuesday. Reversing a 1.47% decline from Monday, the VIX ended the day at 33.0.

The VIX had been on the way to a 4th consecutive day in the red before an afternoon surge from sub-27 levels.

Dovish chatter from FOMC members coupled with a warning from infectious disease official Anthony Fauci delivered the pickup in fear.

Anthony Fauci warned of the possible repercussions of reopening the economy too quickly, while central bankers talked of massive bankruptcies as a result of the lockdown.

The combination of the two, together with the dire inflation figures left the U.S major indexes in the red.

On Tuesday, the S&P500 slid by 2.05%, with the Dow and NASDAQ declining by 1.89% and by 2.06% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. March industrial production figures for the Eurozone are due out later today.

Following some particular dire production figures from member states last week and the April PMI numbers, however, there should be little reaction to today’s figures.

From the U.S, April’s wholesale inflation figures should also have a muted impact later in the day.

The lack of influence from the data will leave the majors in the hands of geopolitics and COVID-19 updates.

We would expect concerns over the rise in the new of new coronavirus cases in South Korea and China to continue to test market resilience.

A similar trend could transpire across the EU and the U.S, as lockdown measures ease. Such an outcome would be catastrophic…

The Latest Coronavirus Figures

On Tuesday, the number of new coronavirus cases rose by 71,802 to 4,328,342. On Monday, the number of new cases had risen by 76,701. The daily increase was lower than Monday’s rise and lower than an 81,537 increase on the previous Tuesday.

France, Germany, Italy, and Spain reported 4,176 new cases on Tuesday, which was down from 5.374 new cases on Monday. On the previous Tuesday, 4,993 new cases had been reported.

From the U.S, the total number of cases rose by 21,450 to 1,407,284 on Tuesday. On Monday, the total number of cases had risen by 18.196. On Tuesday, 5th May, the total new number of cases had risen by 25,189.

In the futures markets, at the time of writing, the DAX was down by 238.5 points, with the Dow down by 82 points.

European Equities: COVID-19 Jitters Return as Wave 2 Hits Asia…

Economic Calendar:

Wednesday, 13th May

Eurozone Industrial Production (MoM) (Mar)

Thursday, 14th May

German CPI (MoM) (Apr) Final

Spanish CPI (YoY) (Apr) Final

Spanish HICP (YoY) (Apr) Final

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

It was a bearish start to the week for the European majors, with the CAC40 falling by 1.31% to lead the way down. The DAX30 and EuroStoxx600 saw more modest losses of 0.73% and 0.40% respectively.

There were no stats to spook the markets on the day, leaving the markets to consider the latest rise in new COVID-19 cases in Asia.

Both China and South Korea reported new clusters, raising concerns over the easing of lockdown measures in Europe. A 2nd wave of infections across the EU would certainly raise the prospects of a more extended lockdown period…

The Stats

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

There were also no material stats from the U.S to provide direction later in the day.

The Market Movers

For the DAX: It was a mixed bag for the auto sector on Monday. Continental, Daimler, and Volkswagen fell by 0.41%, 1.28%, and 0.67% respectively. BMW bucked the trend, with a 1.25% gain.

It was a bearish day for the banks. Deutsche Bank slid by 2.08%, with Commerzbank falling by 1.26%.

Deutsche Lufthansa slid by 2.70%, with COVID-19 jitters and the UK’s lockdown easing plans bringing airlines back into focus.

From the CAC, the banking sector also struggled at the start of the week. BNP Paribas fell by 2.48%, with Credit Agricole and Soc Gen seeing losses of 3.25% and 2.70% respectively.

It was a mixed day for the auto sector. Peugeot fell by 2.12%, while Renault rose by 0.78%.

Air France-KLM and. Airbus SE saw relatively heavy losses of 3.32% and 2.80% respectively.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX, which fell by 1.47% on Monday. Following on from an 11.01% slide on Friday, the VIX ended the day at 27.6

There were no stats to provide direction on the day. A lack of stats left market sentiment towards COVID-19 and lockdown measures to influence risk appetite.

Falling crude oil prices and fears of a 2nd wave of coronavirus infections as a result of an easing in lockdown measures limited the downside for the VIX.

The S&P500 rose by 0.02%, with the NASDAQ gaining 0.78%, while the Dow slipped by 0.45% on the day.

VIX 12/05/20 Daily Chart

The Day Ahead

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

A lack of stats leaves the majors in the hands of geopolitics and COVID-19 numbers once more.

Reports of new COVID-19 clusters in South Korea and China will raise concerns over the possible impact of easing lockdown measures.

It will likely mean that borders will likely remain closed for an extended period of time, which would be a market negative.

Any chatter from EU member states over the renewed spread of the virus in Asia will influence.

The markets will also need to monitor any chatter from Beijing and Washington on trade talks.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 63,120 to 4,242,959. On Sunday, the number of new cases had risen by 78,198. The daily increase was far lower than Sunday’s rise and lower than a 74,217 increase on the previous Monday.

France, Germany, Italy, and Spain reported 5,315 new cases on Monday, which was up from 3.549 new cases on Sunday. On the previous Monday, 3,642 new cases had been reported. A rise in the number of cases in Spain led to the uptick.

From the U.S, the total number of cases rose by 13,704 to 1,381,342 on Monday. On Sunday, the total number of cases had risen by 20,329. On Monday, 4th May, the total new number of cases had risen by 22,145.

In the futures markets, at the time of writing, the DAX was down by 61.5 points, with the Dow down by 153 points.

Dollar Short Reduced; Swiss Franc Long Raches 2016 High

The risk-on seen during the previous weeks paused with the S&P 500, U.S. 10-year Notes and the dollar all trading softer. The dollar was nevertheless in demand against most of the ten IMM currency futures tracked in this, not least against the euro and Japanese yen. Exceptions being the Aussie dollar and the Swiss franc which reached a level of longs last seen in 2016.

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Hedge funds and other large speculators bought U.S. dollar for a second week to May 5. Buying against ten IMM currency futures were broad based resulting in the gross dollar short being reduced by 17% to $6.7 billion. The two exceptions being the Aussie dollar and the Swiss franc, with the long on the latter rising to the highest since 2016.

Biggest changes weighing the most on the sell side was the euro, which was sold for a second week, and the Japanese yen long which retraced after reaching a 13 months high a week earlier. Selling of the Mexican peso resumed despite rising 1.7% against the dollar.

Leveraged fund positions in bonds, stocks and VIX

The speculative short position in the C’Boe VIX futures was cut by 41% to 19k lots, an almost 15 month low. The reduction occurred despite a 4.6% rally in the S&P 500 Index driving a 12% drop in volatility. Interestingly the reduction was almost entirely driven by short positions being closed, potentially a sign of fading optimism that the stock market rally can continue.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.
This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

European Equities: Geopolitics and COVID-19 in Focus, with no Major Stats to Rock the Boat

Economic Calendar:

Wednesday, 13th May

Eurozone Industrial Production (MoM) (Mar)

Thursday, 14th May

German CPI (MoM) (Apr) Final

Spanish CPI (YoY) (Apr) Final

Spanish HICP (YoY) (Apr) Final

Friday, 15th May

German GDP (QoQ) (Q1) 1st Estimate

German GDP (YoY) (Q1) 1st Estimate

French CPI (MoM) (Apr) Final

French HICP (MoM) (Apr) Final

Italian CPI (MoM) (Apr) Final

Eurozone GDP (QoQ) (Q1) 2nd Estimate

Eurozone GDP (YoY) (Q1) 2nd Estimate

Eurozone Trade Balance (Mar)

The Majors

It was a bullish end to the week for the European majors, with the DAX30 rallying by 1.35% to lead the way. The CAC40 and EuroStoxx600 weren’t far behind, with gains of 1.07% and 0.91% respectively.

Economic data had a limited impact on the day, in spite of some quite dire numbers from the Eurozone and the U.S.

Updates from Beijing and Washington on trade talks and the phase 1 trade agreement supported the majors on the day.

Plans to continue easing lockdown measures and corporate earnings also played supporting roles on the day.

The Stats

It was a quiet day on the Eurozone economic calendar on Friday. Key stats were limited German trade data for March that barely moved the dial.

Germany’s trade surplus narrowed from €21.6bn to €12.8bn in March. Economists had forecast a surplus of €17.5bn.

According to Destatis,

  • Exports slid by 11.8% from the previous month and by 7.9% from the same month a year earlier. This was the largest monthly decline in exports since records began back in 1990.
  • Imports fell by 5.1% from the previous month and by 4.5% from the same month a year earlier. This was the largest monthly decline since 2009.
    • Germany exported goods to the value of €55.6bn to EU member states, while importing €48.7bn.
    • Compared with March 2019, exports to EU countries fell by 11.0%, while imports fell by 8.0%.
    • Germany exported goods to the value of €38.3bn (-14%) to Euro area countries, while importing goods to the value of €34.0bn (-7.8%).
    • To EU countries not belonging to the Euro area, Germany exported goods to the value of €17.3bn (-3.8%), while importing €14.8bn (-8.6%) worth of goods.
    • Compared with March 2019, exports to countries outside of the EU fell by 4.3%, while imports fell by 0.1%.

From the U.S, April nonfarm payroll and unemployment figures failed to spook the markets, with economists having forecasted more dire numbers.

Nonfarm payrolls slumped by a post-war record of 20.5m in April, leading to an unemployment rate of 14.7%. Economists had, however, forecasted a fall of 22m in nonfarm payrolls and an unemployment rate of 16.0%.

Hopes were that this is as bad as it gets, which limited the damage. The markets had expected far worst on Friday.

The Market Movers

For the DAX: It was a bullish end to the week for the auto sector. Continental and Daimler rallied by 5.87% and 4.82% respectively to lead the way. BMW wasn’t far behind, gaining 3.42%, while Volkswagen trailed with a more modest 1.93% rise.

It was a mixed day for the banks. Deutsche Bank rose by 1.61%, while Commerzbank slipped by 0.09%.

Deutsche Lufthansa eked out a 0.62% gain on the day.

From the CAC, the banking sector also found support following on from Thursday’s gain. BNP Paribas rose by 1.12%, with Credit Agricole and Soc Gen seeing gains of 1.14% and 1.55% respectively.

It was a bullish day for the auto sector. Peugeot and Renault rallied by 3.75% and by 2.54% respectively.

Air France-KLM managed to bounce back from Thursday’s 2.52% slide, with a 2.83% gain. Airbus SE avoided the red once more, rising by 0.57% on the day.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX, which fell by 11.01% on Friday. Following on from a 7.85% decline on Thursday, the VIX ended the day at 28.0.

U.S nonfarm payroll and unemployment figures were better than forecasted, providing support to the U.S equity markets.

The general consensus from the numbers was that it was the bottom and that should be the end of the slide in payrolls.

A continued easing of lockdown measures coupled with trade talks between the U.S and China added to the upside on the day.

The S&P500 rose by 1.69%, with the Dow and NASDAQ rallying by 1.91% and by 1.58% respectively.

The Day Ahead

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

With a lack of stats from the U.S later in the day, the majors will be in the hands of market risk sentiment on the day.

Key drivers include updates from any further U.S – China discussions from the weekend and chatter from Brussels on fiscal support.

In spite of a spike in the number of new cases on Thursday of last week, the trend in COVID-19 numbers continued to support the easing of lockdown measures across the EU and the U.S…

A combination of the three would support a 3rd consecutive day in the green.

The Latest Coronavirus Figures

On Sunday, the number of new coronavirus cases rose by 78,198 to 4,179,839. On Saturday, the number of new cases had risen by 100,666. The daily increase was far lower than Saturday’s rise and lower than an 80,636 increase on the previous Sunday.

France, Germany, Italy, and Spain reported just 3,549 new cases on Sunday, which was down from 5,163 new cases on Saturday. On the previous Sunday, 3,938 new cases had been reported.

From the U.S, the total number of cases rose by 20,329 to 1,367,638 on Sunday. On Saturday, the total number of cases had risen by 28,805. On Sunday, 3rd May, the total new number of cases had risen by 27,348.

In the futures markets, at the time of writing, the DAX was up by 80.5 points, with the Dow up by 126 points.

European Equities: A Week in Review – 09/05/20

The Majors

It was a mixed week for the European majors in the week ending 8th May. The DAX30 and EuroStoxx600 rose by 0.39% and by 1.08% respectively, while the CAC40 slipped by 0.49%.

Economic data from the Eurozone did limit the upside in the week. Corporate earnings and market sentiment towards the easing in lockdown measures ultimately delivered the upside in the week.

It did take a bullish end to the week to deliver the gains for the DAX30 and EuroStoxx600, however, and limit the downside for the CAC40.

The markets had hit deep red at the start of the week in response to rising tensions between the U.S and China. News of China looking to calm the situation late in the week and of Washington and Beijing looking to reach an agreement on the phase 1 trade deal were certainly positives.

From the previous weekend, the U.S President had threatened China with tariffs and sanctions that had led to the Monday tumble. It does remain to be seen, however, whether Trump will continue to blame China for the COVID-19 woes in the U.S…

Adding to the upside in the week, was another jump in crude oil prices, driven by a pullback in production and positive stats out of China.

The Stats

It was a busy week on the Eurozone economic calendar. Key stats included April private sector PMIs, Eurozone retail sales figures, and employment numbers from France and Spain.

From Germany, March factory orders, industrial production, and trade figures were also in focus.

From Italy and Spain, the Manufacturing and Service sectors saw activity take a dive in April. While aligned with the prelim numbers from France, Germany, and the Eurozone, Spain’s service sector PMI was particularly alarming.

The Eurozone’s composite PMI came in at 13.6, revised up from a prelim 13.5, while down from 29.7 in March.

In spite of the dire numbers, the downside for majors could have been far more significant.

Stats from Germany and factory orders, in particular, did cause some harm, however, with orders slumping by a record of 15.6%.

We’ve seen plenty of records broken for the wrong reasons of late and this was one that pointed to a more deep-rooted recession.

By Thursday, however, market resilience was evident, with a 9.2% slide in German industrial production having little impact.

On the day, better than expected trade date from China and corporate earnings muted the impact of the stats. Even another 3m jump in U.S jobless claims failed to sink the majors ahead of Friday’s nonfarm payrolls…

At the end of the week, a narrowing of Germany’s trade surplus to just €12.8bn also had little impact, with trade news delivering on Friday…

U.S nonfarm payrolls came in better than forecast, as did the unemployment rate. A 20.5m fall in payrolls and an unemployment rate of 14.7% was not enough to spook the markets.

Having used threats against China to distract the markets the previous weekend, it was pushing trade talks on Friday that distracted the markets from quite dire numbers.

The Market Movers

From the DAX, it was a mixed week for the auto sector, in spite of a bullish end to the week, driven by trade talks. Continental and Volkswagen rose by 1.96% and by 0.78%, while BMW and Daimler fell by 5.31% and by 0.47% respectively.

It was a bearish week for the banking sector, however. Commerzbank and Deutsche Bank slid by 3.85% and by 2.66% respectively.

Lufthansa joined the banks in the red, with a 4.16% slide, which partially reversed a 13.41% breakout from the week prior.

From the CAC, it was also a mixed week for the banks. BNP Paribas eked out a 0.52% gain, while Credit Agricole and Soc Gen fell by 0.27% and by 6.94% respectively.

It was also a mixed bag for the French auto sector, with Renault sliding by 3.20%, while Peugeot ending the week up by 2.75%.

Air France-KLM and Airbus struggled in the week, with the pair sliding by 9.34% and 3.13% respectively.

On the VIX Index

It was back into the red for the VIX that had broken a run of 5 consecutive weekly losses in the week prior. In the week ending 8th May, the VIX slid by 24.76%. Reversing a 3.51% gain from the previous week, the VIX ended the week at 28.0.

Economic data from the U.S failed to raise the fear level in the week, despite the continued surge in jobless claims.

Rising crude oil prices, the easing of lockdown measures, and trade talks between the U.S and China supported the U.S equity markets.

Corporate earnings added to the upside and the NASDAQ in particular.

The S&P500 ended the week up by 3.50%, with the Dow and NASDAQ gaining 2.56% and 6.00% respectively.

VIX 09/05/20 Weekly Chart

The Week Ahead

It’s a relatively busy week ahead on the Eurozone economic calendar. Key stats include March industrial production and trade data for the Eurozone and, more importantly, 1st quarter GDP numbers.

On Friday, Germany’s 1st estimate GDP figures are due out ahead of 2nd estimate figures for the Eurozone.

Expect market sensitivity to the numbers. Germany’s contraction is unlikely to be as dire as those seen in France, Italy, and Spain, however.

Finalized April inflation figures are also due out of Member states and the Eurozone throughout the week. These will have a muted impact on the majors.

From elsewhere, expect industrial production and fixed asset investment numbers from China will influence on Friday.

With U.S stats on the heavier side, the weekly jobless claims on Thursday and April retail sales figures on Friday will need attention.

Outside of the numbers, the markets will be looking for positive updates on trade talks between the U.S and China.

There is also COVID-19 news to monitor throughout the week. Any hint of a pause in easing lockdown measures would be negative for the majors.

European Equities: U.S Nonfarm Payrolls Could Be Too Dire to Ignore…

Economic Calendar:

Friday, 8th May

German Trade Balance (Mar)

The Majors

It was back into the green for the European majors on Wednesday, with the CAC40 rising by 1.54% to lead the way. The DAX30 and EuroStoxx600 weren’t far behind, with gains of 1.44% and 1.09% respectively.

Economic data from China coupled with corporate earnings delivered the upside on the day.

In spite of a 2nd day in the green for the week, the majors remain in negative territory going into today.

On Thursday, the markets managed to brush aside yet another dire set of weekly jobless claims figure from the U.S and disappointing stats from the Eurozone.

An upward trend in new coronavirus cases also had a muted impact as governments push forward on plans to ease lockdown measures.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. Key stats were limited to french nonfarm payroll figures for the 1st quarter and German industrial production figures for March.

Following the market reaction to some quite dire April figures in the week, 1st quarter numbers had a relatively muted impact on the majors.

In the 1st quarter, nonfarm payrolls slid by 2.30%, following a 0.4% rise in the 4th quarter.

German industrial production figures also disappointed but failed to weigh on the majors. Production tumbled by 9.2% in March, month-on-month, which was the largest decline on record. Economists had forecast a 7.5% slide.

According to Destatis,

  • Production in industry excluding industry and construction was down 11.6%.
  • Within industry, production of intermediate goods declined by 7.4%, with the production of consumer goods sliding by 7.5%.
  • The production of capital goods tumbled by 16.5%. The automobile industry recorded a 31.1% jump in production…
  • Outside industry, energy production was down by 6.4%, while the production in construction rose by 1.8%.
  • Year-on-year, industrial production fell by 11.6%.

From the U.S, the weekly jobless claims figures for the week ending 1st May provided little support ahead of tomorrow’s NFP numbers.

Initial jobless claims rose by 3.169m, following a 3.846m rise in the week prior. Economists had forecast a 3m increase.

Ahead of the European open on Thursday, trade data out of China set the tone, with exports unexpectedly rising by 3.5%. Economists had forecast a 15.7% slide.

The Market Movers

For the DAX: It was a mixed day for the auto sector. BMW and Continental fell by 2.10% and 0.59% respectively, while Daimler and Volkswagen rose by 0.37% and 0.40% respectively. German auto production figures weighed on the sector on Thursday.

It was a bullish day for the banks, however, with Deutsche Bank and Commerzbank rising by 2.43% and by 1.09% respectively.

Deutsche Lufthansa saw red once more, with a 0.74% decline following Wednesday’s 3.30% slide.

From the CAC, the banking sector also found support following Wednesday’s pullback. BNP Paribas rose by 1.77%, with Credit Agricole and Soc Gen rallying by 2.54% and by 2.08% respectively.

It was a bearish day for the auto sector, however. Peugeot and Renault fell by 0.99% and by 0.05% respectively.

Air France-KLM saw red, with a 2.52% fall. The decline came off the back of a dire earnings forecast for the June quarter. Airbus SE avoided being dragged into the red, however, rallying by 3.82% on the day.

On the VIX Index

The choppy week continued for the VIX, which returned to the red on Thursday. Following a 1.52% gain on Wednesday, the VIX slid by 7.85% on Thursday to end the day at 31.4.

Corporate earnings and China stats delivered the upside on the day as the markets brushed aside another jump in initial jobless claims.

On Thursday, the S&P500 rose by 1.15%, with the Dow and NASDAQ closing out the day with gains of 0.89% and 1.41% respectively.

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Key stats are limited to Germany’s April trade figures.

While we do anticipate some market reaction to today’s numbers, expect U.S nonfarm payroll and unemployment figures to be the key driver.

On the geopolitical risk front, the threat of sanctions and tariffs on China continued to linger, with Iran also simmering in the background.

Friday has traditionally been Trump’s preferred day to send threats via Twitter… He will certainly want to distract the markets from today’s nonfarm payroll figures. It may not be enough, however, to divert the market attention from what is likely to be some shocking numbers later today.

We’ve also yet to see the markets react to the latest upward trend in new coronavirus cases…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 191,233 to 3,912106. On Wednesday, the number of new cases had risen by 87,960. The daily increase was far higher than Wednesday’s rise and 75,118 increase on the previous Thursday.

France, Germany, Italy, and Spain reported 16,103 new cases on Thursday, which was up from 9,651 new cases on Wednesday. On the previous Thursday, 7,182 new cases had been reported. All 4 member states saw a rise in new cases, with France and Spain reporting the highest increases on the day.

From the U.S, the total number of cases rose by 56,348 to 1,291,804 on Thursday. On Wednesday, the total number of cases had risen by 20,715. On Thursday, 30th April, the total new number of cases had risen by 30,883.

In the futures markets, at the time of writing, the DAX was up by 82.5 points, with the Dow up by 123 points.