European Equities: Member State Inflation Figures for May in Focus

The Majors

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

The CAC40 and the DAX30 rose by 0.75% and by 0.74% respectively, with EuroStoxx600 gaining 0.57%.

Economic data from the Eurozone and the U.S took a back seat on Friday, in spite of a marked jump in U.S inflation.

Assurances from the ECB of status quo on the monetary policy front and optimism towards the economic outlook remained the key driver.

With the EU member states reopening borders for tourists, hopes are for a sharp rebound in economic growth through the 2^nd half of the year. The easing of lockdown measures would support consumption and a further pickup in private sector activity.

From the U.S, U.S President Biden’s spending plan added the market optimism on the day.

The Stats

Economic data from the Eurozone was on the busier side this morning with the French economy in focus.

1^st Quarter GDP

In the 1^st quarter, the French economy contracted by 0.1% quarter-on-quarter, revised down from a prelim 0.4% expansion. In the 4^th quarter, the economy had contracted by 1.5%.

According to Insee.Fr,

• Households’ consumption expenditure rose by a modest 0.1% after having tumbled by 5.6% in Q42020. Compared with the final quarter before the pandemic, however, consumption was down 6.8%.
• Gross fixed capital formation (GFCF) increased by 0.2% after having fallen by 1.7% in the previous quarter. In the 4^th quarter of 2020, GFCF had risen by 1.7%.
• Trade had a negative impact on GDP, with imports up 1.1%, while exports fell by 0.2%. Compared with the pre-crisis 4^th quarter of 2019, imports were down 6.9%, with exports down 9.9%.

Household Consumption

In April 2021, consumer spending tumbled by 8.3%, month-on-month, versus a forecasted 0.4% increase. Consumer spending had fallen by 0.3% in March.

According to Insee.Fr,

• The slide was mainly due to an 18.9% slump in spending on manufactured goods, attributed to the 3^rd lockdown in April.
• Energy expenditure fell by a modest 0.6%, with food consumption declining by 0.2%.
• Spending was 9.5% below its average level in Q4 2019.

Inflation

According to prelim figures, the annual rate of inflation picked up from 1.2% to 1.4% in May. Month-on-month, consumer prices increased by 0.3%, following a 0.1% rise in April.

According to Insee.Fr,

• An acceleration in energy prices supported the pickup in inflationary pressure in May. Year-on-year, energy prices jumped by 11.8%.
• Prices for manufactured goods were estimated to be stable, while food prices are expected to decline. Food prices are estimated to fall by 0.2%.

From the U.S

At the end of the week, the focus shifted to inflation, personal spending, and consumer sentiment.

In May, personal spending rose by a more modest 0.5% after a 4.7% jump in April.

Inflationary pressures were on the rise, however, with the Core PCE Price Index rising by 0.7% in April. In the month of March, the Index had risen by 0.4%.

Year-on-year, the index jumped by 3.1% coming in ahead of a forecasted 2.9%. In April, the index had risen by 1.9%, year-on-year.

Finalized consumer sentiment figures affirmed a decline from April.

In May, the Michigan Consumer Sentiment Index fell from 88.3 to 82.9, which was up from a prelim 82.8.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. Daimler fell by 1.22% to lead the way down, with BMW and Volkswagen ending the day with losses of 0.34% and 0.27% respectively. Continental bucked the trend, however, rising by 0.18%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.73%, while Commerzbank fell by 0.24%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 0.16% and by 0.36% respectively, with Credit Agricole gaining 1.52%.

It was a mixed day for the French auto sector, however. Stellantis NV rose by 0.17%, while Renault ended the day down by 0.25%.

Air France-KLM and Airbus SE saw gains of 2.61% and 1.24% respectively.

On the VIX Index

It was back into the green after 2 consecutive days in the red for the VIX on Friday.

Following a 3.57% decline on Thursday, the VIX rose by 0.12% to end the day at 16.76.

The NASDAQ eked out a 0.09% gain, with the Dow and the S&P500 ending the day up by 0.19% and by 0.08% respectively.