Europe Points To Weaker Start Ahead Of Slew Of Data
Fiona Cincotta May 6, 2020 7:27 AM
European stocks are pointing to a mildly lower start amid growing fears over the damage that the coronavirus crisis is inflicting on economies.
After a strong session on Tuesday which saw the FTSE close 1.6% higher and the Dax gain over 2.5%, European stocks are pointing to a mildly lower start amid growing fears of the damage that the coronavirus crisis is causing to economies.
Currently the markets have been pricing in the expectation that economies will be able to pick up reasonably well from where they left off pre-coronavirus crisis, once the lock down is eased. However, with growing job losses and a change in dynamic in certain industries, such as aviation, and potentially many other sectors such as retail, restaurants, gyms and bars, it’s becoming increasingly clear that this will be a rocky road to recovery. Markets are lacking conviction.
In the UK, the Treasury’s conundrum of how to phase out the furlough scheme without triggering mass redundancies will be key to how the UK comes out of the coronavirus crisis. The government’s furlough scheme has been a life support machine for the UK labour market. 6.3 million furloughed people are paid 80% their wage by the government, an initiative which has been crucial in keeping smaller business afloat. Yet the speedy removal of such an initiative could result in a huge wave of redundancies. Service sector PMI data yesterday, which came in at a record low of 13.4 in April highlighted the collapse of activity in the UK’s dominant sector.
Service sector PMI, factory orders & retail sales
Data from Europe will be under the spotlight today with service sector pmi’s due to be released for the Eurozone.
Spain and Italy, which rely heavily on tourism are expected to see service sector activity collapse as lock down measures keep tourists away. Spain’s service sector PMI is expected to slump to 10 in April, down from 23. Italy is expected to record just 9 on the index, a number so low it is almost unbelievable.
Adding to the disastrous data, factory orders in Germany are due to have declined -10% month on month in March and Eurozone retail sales are due to drop -8% mom in the same month, down from a 0.9% increase in February.
Traders will need to stomach a barrage of weak data across today’s session.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.