The economy of the Eurozone is likely to seesaw this week with pivotal data releases in France and Germany, following the positive conclusion of last week on the announcement of ECB’s financial ‘bazooka’.
Last Wednesday, the European Central Bank announced that it would be injecting 750 billion euros into the economy to stimulate the reeling businesses in the Eurozone.
ECB’s decision to increase the aggregate money supply in the Eurozone is the latest development in the Central Bank's bolstered quantitative easing program, which has prompted a jump of nearly 4 per cent in the EU50 on Friday.
At the beginning of this week, however, the mood on the European stock market is once again gloomy. Crucial economic data in France and Germany are expected to dampen the projections for a quick recovery once again.
In France, the Flash Services PMI is projected to tumble to 39.6 index points in March from the 52.5 points that were recorded in the previous month. In Germany, the same index is anticipated to drop from 52.5 points in February to 43.0 index points in March.
Manufacturing is also expected to depreciate in two countries, albeit not as drastically as the services industry.
The consensus forecasts project a considerable deterioration in services, which occupies the most significant chunk of the Eurozone's overall economy. It is precisely because of the services industry's dependence on the global supply chains that the economy has been hit so hard even in the early days of COVID-19's outbreak.
If the Services PMI data in France and Germany, which is scheduled for release on Tuesday, meets or falls short of these expectations, the CAC 40 index in France and the DAX index in Germany are likely to plummet below last week’s minor correction.
They have already started falling after today’s market open, on traders’ expectations for tomorrow’s data releases. The rate of depreciation of the CAC 40 and DAX is now matching the rate of depreciation of the S&P 500 futures in the US – around 3.50 per cent.
Meanwhile, the Nikkei 225 in Japan has so far registered around 2 per cent gains during today’s trading session in spite of the now more pronounced fears over the potential cancellation of the Tokyo summer Olympics.
CAC 40, DAX, SPX and Ni225 Compaprison Chart. Image source: Trendsharks ©, created with TradingView.com
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