By Geoffrey Smith
Investing.com -- Europe’s stock markets are acting like they have survived the virus and want to go out and party.
In fairness, there’s plenty to be upbeat about after a weekend in which Standard & Poor’s held off from downgrading Italy, Deutsche Bank (DE:DBKGn) rushed to tell people that it actually made a profit in the quarter, and Europe’s largest car factory (and schools in Shanghai and Beijing) reopened.
Italy and Spain both mapped out their plans for easing restrictions on national life, the German, Dutch and French governments moved toward removing the tail risk of bankruptcy for Lufthansa and Air France-KLM and – most importantly - the death toll continued to fall across most of the continent.
Nor has any of the above dimmed speculation that the European Central Bank will also increase its attempts to support the region by expanding its bond purchase program at its policy meeting on Thursday.
By 5:30 AM ET (0930 GMT), the benchmark Stoxx 600 was up 1.7% at 335.14. However, it still can’t get above 337, despite what is now its fourth attempt in the last two weeks. None of the big three indices on the continent have been able to push beyond their initial rebound highs at the end of last month and are on course to end April pretty much where they started it, even though Germany's comparative success in containing the disease has seen it outperform with a 9% rise.
Clearly, uncertainty over the course of the rest of the year is still sky-high. Deutsche Bank’s release raised as many questions as it answered. It bolstered loan loss provisions by 500 million euros ($504 million) and warned that “we see continued high demand for support from our clients in this challenging situation” - whereby the word "support" covers a multitude of possibilities of varying severity.
News of government support for the airlines was, of course, welcome, but a look across the North Sea at Norwegian Air Shuttle (OL:NWC) suggests that it is no guarantee of a miracle for the present generation of shareholders. Conditionality is all, and there is no clarity yet on what conditions the French, German and Dutch states will extract for their help. Ryanair chief executive Michael O’Leary’s comments last week, however, that the packages will face legal challenge – irrespective of the broad political commitment to loosening state aid rules.
But for a more neutral view on the outlook for airlines, it may be best to look at their suppliers. Airbus (PA:AIR) stock was the biggest loser on the CAC 40 on Monday, falling 2.9%, after a leaked internal memo pointed to further cuts in production and jobs.
Chief executive Guillaume Faury told employees the company is "bleeding cash at an unprecedented speed" and that a recent drop of a third or more in production rates did not reflect the worst-case scenario and would be kept under review.
Both Airbus and Boeing (NYSE:BA) are clearly preparing for long-term changes to their trajectories. Deutsche Bank, by contrast, said on Monday it expected the impacts of Covid-19 to be only temporary, at least as regards regulation and regulatory ratios. Both are due to post full results later this week. With both, as with many others besides, certainty about the outlook will be too much to ask for.