Further progress towards a COVID-19 vaccine hit the news wires early, supporting riskier assets. U.S stats and today’s COVID-19 numbers will influence, however.
A 2-day rally came to an end on Tuesday, as news of record-high new COVID-19 cases overshadowed hopes of a vaccine.
Economic data through the Asian and European sessions failed to impress on the day, leaving the markets focused elsewhere.
Tech stocks were amongst the worst hit as California reintroduced lockdown measures in a bid to curb the spread of the coronavirus.
News from Asia was no better, with the HK government reintroducing social distancing measures as a result of a new spike in new cases.
The CAC40 fell by 0.96%, with the DAX30 and EuroStoxx600 declining by 0.80% and by 0.84% respectively.
It was a busy day on the Eurozone economic calendar. Key stats included Germany and the Eurozone’s ZEW Economic Sentiment figures for July and May Industrial Production figures for the Eurozone.
Germany’s ZEW Current Conditions indicator rose from -83.1 to -80.9, while the Economic Sentiment indicator fell from 63.4 to 59.3. Economists had forecast -65.0 and 60.0 respectively.
The Eurozone’s Economic Sentiment indicator rose from 58.6 to 59.6, coming in ahead of a forecasted 55.8.
Industrial production failed to impress in May, with production rising by 12.4% in May, following an 18.2% slump in April. Economists had forecast a 15% rise.
According to Eurostat,
The highest increases were registered in Italy (+42.1%), France (+20.0%), and Slovakia (+19.6%).
Ireland (-9.8%) registered the largest decline.
In the Eurozone, production of durable consumer goods and capital goods surged by 54.2% and by 25.4% respectively.
The production of intermediate goods rose by 10.0%, non-durable consumer goods by 2.8%, and energy by 2.3%.
From the U.S
It was a relatively quiet day on the U.S calendar. June inflation figures had a muted impact on the European majors.
The Market Movers
For the DAX: It was a bullish day for the auto sector on Tuesday. Continental and Daimler led the way, rising by 2.02% and by 1.84% respectively. BMW and Volkswagen saw more modest gains of 0.73% and by 0.44% respectively.
It was also a bullish day for the banks. Deutsche Bank rose by 2.55%, with Commerzbank ending the day up by 2.34%.
WIRECARD AG followed on from Monday’s 5.38% slide with a 0.97% loss.
From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen both fell by 0.61%, while Credit Agricole bucked the trend with a 0.72% gain.
The French auto sector saw red on the day, with Peugeot and Renault declining by 1.07% and 0.83% respectively.
Air France-KLM and Airbus SE ended the day down by 0.24% and 2.49% respectively.
On the VIX Index
It was back into the red for the VIX on Tuesday. Partially reversing a 17.96% jump from Monday, the VIX fell by 8.29% to end the day at 29.52.
FOMC member chatter delivered support for the U.S majors. Assurances by FOMC member Brainard that large-scale asset purchases would continue delivered upside on the day.
Concerns over the reintroduction of containment measures in California and continued spike in new COVID-19 cases limited the upside.
The S&P500 and NASDAQ saw gains of 1.34% and 0.94% respectively, with the Dow rising by 2.13%.
The Day Ahead
It’s a quieter day ahead on the Eurozone economic calendar. Key stats are limited to finalized June inflation figures from Italy.
We don’t expect the stats to move the dial, leaving the European majors in the hands of COVID-19 and geopolitics early on.
The reintroduction of lockdown measures is bad news for the U.S and global economic recovery. We have yet to see any major spikes in the Euro area, however, to lead to new measures in key member states.
Riskier assets got a boost ahead of the European open, with progress towards a COVID-19 vaccine delivering support.
From the U.S
It’s also a relatively quiet day on the economic calendar. Industrial production figures for June and NY State’s manufacturing index figures will provide direction late in the day.
The Latest Coronavirus Figures
On Tuesday, the number of new coronavirus cases rose by 218,739 to 13,454,480. On Monday, the number of new cases had risen by 199,164. The daily increase was higher than Monday’s rise while lower than 222,176 new cases from the previous Tuesday.
Germany, Italy, and Spain reported 1,110 new cases on Tuesday, which was down from 2,700 new cases on Monday. On the previous Tuesday, 776 new cases had been reported.
From the U.S, the total number of cases rose by 65,594 to 3,545,077 on Tuesday. On Monday, the total number of cases had increased by 65,488. On Tuesday, 7th July, a total of 67,655 new cases had been reported.
In the futures markets, at the time of writing, the DAX was up by 196 points, with the Dow up by 280 points.