Yahoo Finance 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.
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.
This article was originally posted on FX Empire
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