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.
This article was originally posted on FX Empire
