European Equities: A Week in Review – 01/04/22
It was a bullish week for the European majors in the week ending April-1, 2022.
The CAC40 rose by 1.99%, with the EuroStoxx600 and the DAX ending the week with gains of 1.06% and 0.98%, respectively.
It was a choppy week for the European majors. Through the first half of the week, hopes of an end to the Russian invasion of Ukraine drove demand for riskier assets.
Failure to agree to end the invasion led to a partial retracement through the second half of the week.
Economic data took a back seat once more, with disappointing manufacturing sector PMIs having limited impact. A downward trend in crude oil prices was positive amidst concerns over inflation.
Mid-week, the German economy was in the spotlight. While the stats were skewed to the negative, the impact on the European majors was modest. With Russia’s invasion of Ukraine ongoing, investors anticipate a near-term impact on economic activity.
In April, Germany’s GfK Consumer Climate Indicator fell from -8.5 to -15.5, with retail sales rising by just 0.3% in February.
Unemployment numbers were also underwhelming, with an 18k fall in unemployment leaving the unemployment rate at 5.0%.
On Friday, manufacturing sector PMI numbers for March also failed to impress.
In March, Spain’s manufacturing PMI fell from 56.9 to 54.2, with Italy’s PMI declining from 58.3 to 55.8. Economists had forecast PMIs of 55.5 and 57.0, respectively.
The French manufacturing PMI fell from 57.2 to 54.7, down from a prelim of 54.8. Germany’s PMI declined from 58.4 to 56.9, down from a prelim 57.6.
For the Eurozone, the manufacturing PMI fell from 58.2 to a 14-month low of 56.6, down from a prelim 57.0.
Other stats in the week included finalized inflation figures for member states and the Eurozone and French consumer spending figures. These stats drew little interest, with Germany’s economy and survey-based data in focus.
From the U.S
It was a busier week on the economic calendar. Early in the week, consumer confidence and JOLTs job openings drew interest. Consumer confidence improved in March, with JOLTs job openings coming in better than forecasted.
Mid-week, ADP nonfarm payrolls, and Q4 GDP numbers failed to deliver market support. The release of the stats coincided with a shift in sentiment towards Russia and Ukraine reaching a ceasefire agreement.
According to the ADP, nonfarm payrolls increased by 455k in March, down from 486k in February. The U.S economy also grew at a slower pace than previously estimated.
Market attention then shifted to Thursday, with inflation, personal spending, and jobless claims drawing investor interest.
A further pickup in inflationary pressure supported FED Chair Powell’s more hawkish stance on monetary policy.
While personal spending was weak, nonfarm payrolls rose at a decent clip in March.
In March, nonfarm payrolls increased by 431k, following a 750k increase in February. The March numbers tested appetite for riskier assets, with the markets seeing 431k good enough for a more aggressive FED rate path.
The Market Movers
From the DAX, it was a bullish week for the auto sector. Volkswagen rallied by 4.23%, with BMW and Continental ending the week with gains of 1.43% and 1.55%, respectively. Daimler rose by a more modest 0.44%.
It was yet another bullish week for the banking sector. Deutsche Bank and Commerzbank rose by 1.41% and 0.28%, respectively.
From the CAC, it was a bullish week for the banks. BNP Paribas rallied by 3.38%, with Credit Agricole and Soc Gen gaining 2.25% and 2.69%, respectively.
Things were also bullish for the French auto sector. Stellantis NV and Renault ended the week up 1.87% and 4.70%, respectively.
Air France-KLM and Airbus rose by 1.21% and 3.24%, respectively.
On the VIX Index
It was a fourth consecutive week in the red for the VIX in the week ending April-01, marking the fifth decline in seven weeks.
Following a 12.82% slide from the previous week, the VIX fell by 5.67% to end the week at 19.63.
3-days in the red from 5 sessions, which included a 5.67% decline on Monday, delivered the downside.
For the week, the Dow slipped by 0.12%. The NASDAQ 100 and the S&P500 gained 0.65% and 0.06%, respectively.
The Week Ahead
It’s a relatively busy week ahead on the Eurozone economic calendar. On Monday, trade data from Germany will draw interest ahead of the member state and Eurozone private sector PMIs on Tuesday.
In the second half of the week, the German economy will be back in focus. Factory orders and industrial production will draw attention.
From the U.S, ISM Non-Manufacturing PMI and Jobless claims will draw interest on Tuesday and Thursday.
Away from the economic calendar, Russia’s invasion of Ukraine will remain a key driver in the week. Progress towards a ceasefire would support the European majors.