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Major European indices closing higher, reversing earlier session lows

  
Analysis, Global Indices
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German DAX rises 1.5%. France’s CAC up 0.9%

The major European indices are closing higher and in the process reversed earlier session lows. Provisional closes are showing:
  • German DAX, +1.5%. The low extended to -0.87%
  • France’s CAC +0.9%. The low extended to -1.39%
  • UK’s FTSE, +1.2%. The low extended to -0.68%
  • Spain’s Ibex, +1.2%. The low extended to -1.66%
  • Italy’s FTSE MIB, +1.1%. The low extended to -2.11%

In the European debt market, the benchmark 10 year yields are ending the session lower. The biggest decline are was France at -1.7%. It moved above the 0.0% level at the highs today (high yield reached 0.002%). Buyers came in and pushed yield down into the close (trading at -0.033%).

In the UK today, the treasurysold £3.8bn of three-year gilts at a yield of -0.003%. That was the first sale below 0% in the UK as investors look for further declines in UK rates as the battle Brexit and coronavirus headwinds.
Bank of England’s governor Bailey said that the challenge for the central bank is getting inflation to return to target.
German DAX rises 1.5%. France's CAC up 0.9% 

Germany’s daily coronavirus case count has nearly tripled – harsh lockdowns may be reintroduced

  
  Analysis
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Justin updates the German count each day, and its getting ugly again.

In brief:
  • Germany reported 933 new coronavirus cases on Tuesday
  • That is just about 3 times as many as the day before (admittedly coming off a weekend the numbers can be skewed)
  • rising figure comes 6 days after the country reopened shops, some schools
  • Germany’s “R” rate has  climbed above 1 for the past 3 days (see below for what R is)
Authorities are considering reintroducing lockdown measures
  • Trigger for this is if there are more than 50 cases per 100,000 people
Watch this not just in German, but other countries. Yesterday I posted on a rise in cases in South Korea:
  • Coronavirus – South Korea seeing a cluster infection linked to clubs and bars in Seoul
—
R rate of 1 means that on average an infected person infects one other
Above 1 means that the outbreak is worsening
Justin updates the German count each day, and its getting ugly again.

European shares end the day with solid gains

  
Analysis, Global Indices
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German DAX, +3.13%. France’s CAC, +2.3%

the major European indices are ending the day with gains across the board led by the German Dax up 3.13%. The German DAX, France’s CAC, and Italy’s FTSE MIB are closing near highs for the day.
Below are the percentage ranges for major indices in both the US and Europe. The US stock indices are also trading at session highs with the session.
German DAX, +3.13%. France's CAC, +2.3%_In the European debt market, the the benchmark 10 year yields were mixed with Germany and UK yields up while France, Spain, Italy, and Portugal yields lower.
European yields are mixed

In the US debt market, yields are higher with a steeper yield curve. The 2 – 10 year spread is up to 42 basis points from 37.63 basis points on Friday.

US yields are higher
In other markets:
  • spot gold is trading down $18.13 or minus was 1.06% at $1711.32
  • WTI crude oil futures (June contract )are sharply lower with the price down $4.75 or -28% at $12.19

European shares close with mostly modest gains

  
Analysis, Global Indices
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German Dax up 0.5%

The European shares are closing with mostly modest gains as Germany works toward the reopening of the economy.
The provisional closes are showing:
  • German DAX up 0.5%  . The low reached -0.42%
  • France’s CAC up 0.2%.  The low reach -0.80%
  • UK’s FTSE 100 up 0.8%. The low reached -0.35%
  • Spain’s Ibex up 0.3%. The low reached -1.56%
  • Italy’s FTSE MIB up 0.7%. The low reached +0.06%
In the European debt market, the benchmark 10 year yields are ending with declines across the board, with the Italian yields falling the most at -3.9 basis points.
European yields are lower
In other markets as London/European traders look to exit shows:
  • spot gold up $10.28 or 0.60% at $1727.37
  • WTI crude oil futures are trading up $0.22 or 1.11% at $20.10

Oil – Texas shale explorer says it’ll halt drilling if state imposes OPEC-style production caps

  
  Analysis
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Diamondback Energy is on of the biggest Texas shale explorers.

  • Chief Financial Officer Kaes Van’t Hof said the company already is in the process of shutting down 30% of its drilling and would take it to zero if the state clamps down on production.
In the event of quotas …
  • “That turns that industry, the service industry, on to the same issues that the restaurant industry is facing today where they’re completely shut down with zero revenue and zero employment.”
I bolded that bit on jobs – a huge issue right now and a very unsubtle threat from the firm. Imposing quotes on US producers was always going to be difficult for this output cut deal.
Info comes via Bloomberg.

Diamondback Energy is on of the biggest Texas shale explorers.

China is offering to completely remove the requirement for forced joint ventures by Jan

  
  Analysis
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Fox Business report

From Fox’s Edward Lawrence:
China is offering to completely remove the requirement for forced joint ventures by Jan 2020. The Chinese would like to see if further tariffs could be suspended or rolled back. We will see if that is enough for the US Trade Team

Eurostoxx futures +0.5% in early European trading

  
Analysis, Global Indices
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Positive vibes seen in early trades in Europe

  • German DAX futures +0.5%
  • French CAC 40 futures +0.8%
  • UK FTSE futures +0.3%
Just be wary that a large part of the gains seen here can be attributed to catch-up play to the performance of US equities overnight. European equities closed in a mixed mood before the late surge in US stocks – led by tech – so that is helping to fuel some of the gains.
Other than that, Facebook beating forecast revenues in Q2 is also helping to lift sentiment further but it’s all about the ECB later on. Expectation that the central bank will ease today has heightened (OIS market sees odds of a 10 bps rate cut at ~51% now) and that should tells you how markets are feeling about the decision later on today.
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