European Equities: German Business Sentiment and COVID-19 in Focus

The Majors

It was a bullish end to the week for the majors on Friday.

The CAC40 rose by 1.35%, with the DAX30 and the EuroStoxx600 ending the day up by 1.00% and by 1.09% respectively.

A further pickup in private sector activity across the Eurozone supported the majors at the end of the week.

With Monday’s sell-off a distant memory, optimism towards the earnings season and sentiment towards ECB monetary policy also delivered yet more upside.

The gains came in spite of disappointing PMI numbers from France, the UK, and from the U.S.

The Stats

French, German, and Eurozone private sector PMIs were in focus on Friday.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

• The composite PMI rose to a 252-month high in July, according to prelim figures.
• Business activity accelerated for a 4^th consecutive month, supported by a continued easing of COVID-19 restrictions.
• Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
• Firms hired staff for a 6^th consecutive month, with the pace of hiring the 2^nd steepest since Jan-2018.
• Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

From the U.S

Prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler rallied by 5.00% to lead the way, supported by a broker upgrade to buy. Volkswagen and Continental rose by 2.66% and by 2.35% respectively, with BMW gaining 2.06%.

It was a mixed day for the banks, however. Deutsche Bank rose by 1.05%, while Commerzbank ended the day down by 0.04%.

From the CAC, it was a bullish day for the banks. Soc Gen rallied by 1.83%, with BNP Paribas and Credit Agricole rising by 1.18% and by 1.09% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 1.04% and by 0.97% respectively.

Air France-KLM slipped by 0.28%, while Airbus SE rose by 1.81%.

On the VIX Index

It was a 4^th consecutive day in the red for the VIX on Friday.

Following a 1.23 decline on Thursday, the VIX fell by 2.77% to end the day at 17.20.

The Dow rose by 0.68%, with the NASDAQ and the S&P500 ending the day up by 1.04% and by 1.01% respectively.