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European Equities: Geopolitics and Economic Data to Drive the Majors

Bob Mason

Economic Calendar:

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 relatively bullish day for the European majors on Wednesday. The DAX30 rose by 1.34% to lead the way, with the CAC40 and EuroStoxx600 gaining 0.87% and 0.98% respectively.

While mixed sentiment towards the COVID-19 vaccine tested the markets, the continued easing of lockdown measures provided support on the day.

The markets continued to bet on an imminent COVID-19 vaccine, following positive updates from pharma company Moderna on Monday. While experts had dampened the optimism from the day prior, the hope remains…

The Stats

It was a relatively busy day on the Eurozone economic calendar on Wednesday. Key stats included finalized April inflation figures and May’s flash consumer confidence numbers for the Eurozone.

The Eurozone’s consumer confidence indicator rose from -22.0 to -18.8 in May, according to prelim figures.

Economists had forecast a slide to -24.0. The Indicator continued to sit well below the long-term average of -11.1, in spite of the slight uptick.

The Eurozone’s finalized inflation figures did little to spook the markets. The annual rate of inflation came in at 0.3%, which was down from 0.7% in March and a prelim 0.4%.

From the U.S, there were no material stats to influence, with the FOMC meeting minutes released after the European close.

The Market Movers

For the DAX: It was a relatively bullish day for the auto sector on Wednesday. Daimler rallied by 3.91% to lead the way, with Volkswagen rising by 1.89%. BMW and Continental and weren’t far behind, with gains of 1.31% and 1.54% respectively.

It was a bullish day for the banks, however. Deutsche Bank rallied by 4.85%, with Commerzbank gaining 3.05%.

Deutsche Lufthansa rallied by 7.74% on the day, reversing a 1.17% loss from Tuesday with interest. The upside came off the back of news of a rescue package coming close to fruition.

From the CAC, it was a bullish day for the banking sector on Wednesday. Soc Gen rallied by 2.99% to lead the way. BNP Paribas and Credit Agricole ended the day with more modest gains of 1.66% and 0.60% respectively.

It was also a positive day for the auto sector, after Tuesday’s sell-off. Peugeot rose by 0.30, with Renault rallying by 6.16%.

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

Air France-KLM continued to see red, with a 0.48% decline, while Airbus SE rose by 1.51%.

On the VIX Index

It was back into the red for the VIX on Wednesday. Reversing a 4.2% rise from Tuesday, the VIX slid by 8.32% to end the day at 28.0. It was the 4th day in the red in 5.

Once more, the equity markets brushed aside the doom and gloom, with the ongoing easing of lockdown measures providing support.

A negative for the markets on the day, however, was the passing of a Bill to delist Chinese companies from U.S exchanges.

On Wednesday, the S&P500 rose by 1.67%, with the Dow and NASDAQ seeing gains of 1.52% and 2.08% respectively.

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include May’s prelim private sector PMIs for France, Germany, and the Eurozone.

Expect plenty of sensitivity to the PMIs, with the impact of the continued easing of lockdown measures needing to be reflected in the PMIs.

While a rise in the PMIs would provide support, new orders and employment will likely garner plenty of attention.

From the U.S, private sector PMIs for May, Philly FED’s Manufacturing Index, and the all-important jobless claims will also influence.

On the geopolitical risk front, expect risk appetite to be tested should the latest anti-China Bill progress through Congress to Trump’s desk…

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 99,724 to 5,082,661. On Tuesday, the number of new cases had risen by 94,819. 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 2,856 new cases on Wednesday, which was up from 2,848 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 21,408 to 1,591,991 on Wednesday. On Tuesday, the total number of cases had risen by 20,688. On Wednesday, 13th May, a total of 21,774 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 84.5 points, with the Dow down by 129 points.

This article was originally posted on FX Empire