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European Equities: A Lack of Stats Leaves Geopolitics and Policy Support in Focus

Bob Mason

Economic Calendar:

Tuesday, 2nd June

Spanish Unemployment Change

Wednesday, 3rd June

Spanish Services PMI (May)

Italian Services PMI (May)

German Unemployment Change (May)

German Unemployment Rate (May)

French Services PMI (May) Final

German Services PMI (May) Final

Eurozone Markit Composite PMI (May) Final

Eurozone Services PMI (May) Final

Eurozone Unemployment Rate (Apr)

Thursday, 4th June

Eurozone Retail Sales (MoM) (Apr)

ECB Monetary Policy Decision (Jun)

ECB Press Conference

Friday, 5th June

German Factory Orders (MoM) (Apr)

The Majors

It was back in the green for the European majors on Monday, while Germany was on Holiday. The CAC40 and EuroStoxx600 saw gains of 1.43% and 1.10% respectively.

Riots across the U.S and beyond over the killing of George Floyd had little influence. China’s retaliation to the U.S Government’s response from last week also had a muted impact on the majors.

On Monday, news hit the wires of Beijing blocking the import of U.S soybeans and pork. During the U.S – China trade negotiations, soybeans had been a hot topic. Trump needs the support of the farmers and China’s decision to look elsewhere, in breach of the phase 1 agreement, will be a blow…

Upward momentum came from a positive headline manufacturing PMI out of China and improved numbers from the Eurozone and the U.S.

The economic data suggested that the continued easing of lockdown measures led to a slower pace of contraction. It was far from impressive, however, and a long way to go before a full recovery.

The Stats

It was a busy day on the Eurozone economic calendar on Monday. Key stats included May’s manufacturing PMIs from Italy and Spain. Finalized PMIs from France, Germany, and the Eurozone were also in focus.

Spain’s manufacturing PMI rose from 30.8 to 38.3, with Italy’s manufacturing PMI jumping from 31.1 to 45.4.

In April, Spain’s manufacturing PMI had tumbled from 45.7 to 30.8, with Italy’s manufacturing PMI from 40.3 to 31.1 in April.

France’s finalized manufacturing PMI came in at 40.6, which was up from a prelim 40.3 and 31.5 in April. In March, the PMI had stood at 43.2.

Germany’s finalized manufacturing PMI came in at 36.6, which was down from a prelim 36.8 while up from an April 34.5. In March, the PMI had stood at 45.4.

The Eurozone’s finalized May Manufacturing PMI came at 39.4. This was down from a prelim 39.5, while up from an April record-low 33.4. In March, the PMI had stood at 44.5.

According to the Eurozone’s Manufacturing Markit Survey,

  • While the Eurozone’s PMI hit a 2-month high, the sector continued to see a marked rate of contraction.
  • It was noted that the sector continued to suffer in spite of looser lockdown measures, with certain government restrictions continuing to hinder growth.
  • Italy stood out, with the PMI rising by more than 14 points to a 3-month high to sit at the top of the table.
  • By contrast, Eurozone powerhouse Germany recorded the lowest PMI, followed by Spain.
  • Following April’s dire conditions, production and new orders fell at a noticeably slower pace.
  • Conditions were still dire, however, with new export orders seeing the 2nd steepest fall in the 23-year series history.
  • Firms also continued to cut staffing levels at a sharp pace.

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

The market’s preferred ISM Manufacturing PMI drew plenty of attention. In May, the ISM Manufacturing PMI rose from 41.5 to 43.1. In April, the PMI had fallen from 49.1 to 41.5.

The Market Movers

For the DAX: German markets were closed on Monday.

From the CAC, bank stocks were on the move at the start of the week. BNP Paribas and Soc Gen rallied by 3.81% and by 4.44% respectively, with Credit Agricole gaining by 2.45%.

The auto sector also saw green for the 1st time in 3-days, with Peugeot and Renault rallying by 4.61% and by 6.19% respectively.

Air France-KLM and Airbus SE found support, with the pair rising by 5.34% and by 4.83% respectively.

On the VIX Index

It was back into the green for the VIX on Monday. Partially reversing a 3.78% loss from Friday, the VIX rose by 2.62% to end the day at 28.23.

There was certainly plenty of reason for the VIX to rise, albeit modestly, on the day. Riots across the U.S and unprecedented unemployment levels do bring plenty of unease.

China’s ban on the imports of U.S soybeans and pork was also a blow.

In spite of this, the U.S equity markets managed to eke out gains, defying gravity once more.

The S&P500 rose by 0.38%, with the Dow and NASDAQ gaining 0.36% and 0.66% respectively.

Looking at the VIX, a possible bottoming out at 27-28 levels suggests that risk appetite could turn…

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. Spanish unemployment change figures are due out later this morning.

While the markets will be looking for a materially lower number of unemployed, the numbers are unlikely to have a material impact on the majors.

The focus on the day will remain on chatter from Beijing and Washington, COVID-19 updates and the news wires. As we have seen in recent weeks, the markets will take just about any positive news to support another leg up…

With so much uncertainty and rising global tensions, however, it could be a testy day ahead.

The Latest Coronavirus Figures

On Monday, the number of new coronavirus cases rose by 95,146 to 6,358,217. On Sunday, the number of new cases had risen by 112,809. While the daily increase was lower than Sunday’s rise it was up from 83,824 new cases from the previous Monday.

France, Germany, Italy, and Spain reported 1,018 new cases on Monday, which was up from 991 new cases on Sunday. On the previous Monday, 747 new cases had been reported. Significantly, however, all 4 member states reported less than 300 cases each at the start of the week.

From the U.S, the total number of cases rose by 21,287 to 1,858,457 on Monday. On Sunday, the total number of cases had risen by 20,569. On Monday 25th May, a total of 19,790 new cases had been reported.

In the futures markets, at the time of writing, the DAX was up by 46 points, while the Dow was down by 126 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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