European Equities: A Week in Review – 01/10/21

The Majors

It was a bearish week for the majors in the week ending 1^st October. The CAC40 fell by 1.82%, with the DAX30 and the EuroStoxx600 sliding by 2.42% and by 2.35% respectively.

Economic data from the Eurozone and China were market negative, thus providing little support to the majors in the week.

A jump in U.S Treasury yields in the early part of the week did the damage, however, with the majors seeing a run of 7 consecutive monthly gains come to an end in September.

Concerns over inflation, the economic recovery, and a possible U.S government shutdown and debt default contributed to the losses.

From the U.S, economic data was good enough to support bets of tapering this year and a possible rate hike in 2022…

The Stats

Early in the week, Germany’s GfK Consumer Climate Index rose from -1.4 to +0.3, which was market positive.

Germany’s unemployment rate held steady at 5.5% after a smaller than expected fall in unemployment in September, however.

French and German consumer spending were upbeat, with increases of 1.0% and 1.1% respectively in August.

Manufacturing sector PMIs were skewed to the negative, however.

Spain’s Manufacturing PMI fell from 59.5 to 58.1, with Italy’s down from 60.9 to 59.7 in September.

France and Germany’s PMIs were revised down from prelims, leaving the Eurozone PMI down from 58.7 to 58.6.

Inflation figures pointed to a further pickup in inflationary pressure at the end of the 3^rd quarter.

In September, the Eurozone’s annual rate of inflation accelerated from 3.0% to 3.4%, raising further questions over the ECB’s transitory view.

From the U.S

Early in the week, durable goods orders and consumer confidence were in focus, with the stats market negative.

While durable goods orders jumped by 1.8% in August, core durable goods rose by just 0.2%. Economists had forecast a 0.5% increase in core durable goods orders.

Consumer confidence also waned, with the CB Consumer Confidence Index falling from 115.2 to 109.3.

On Thursday, the stats were also skewed to the negative. In the week ending 24^th September, initial jobless claims increased from 351k to 362k, with the Chicago PMI falling from 66.8 to 64.7.

The only positive was an upward revision to GDP numbers. In the 2^nd quarter, the U.S economy expanded by 6.7%, which was up from a 2^nd estimate 6.6%.

A busy end to the week saw manufacturing, inflation, and personal spending in focus.

The stats were skewed to the positive.

In September, the ISM Manufacturing PMI rose from 59.9 to 61.1, with personal spending up 0.8% in August. Personal spending had fallen by 0.1% in July.

Month-on-month, the Core PCE Price Index rose by 0.3% following a 0.3% increase in July. Year-on-year, the index increased by 3.6% after having been up by 3.6% in July.

The Market Movers

From the DAX, it was another mixed week for the auto sector. Continental fell by 1.88% to buck the trend once more. Daimler led the way, however, rallying by 4.07%, with BMW and Volkswagen seeing gains of 2.67% and 2.09% respectively.

It was also a mixed week for the banking sector. Deutsche Bank fell by 0.55%, while Commerzbank ended the week up by 2.56%.

From the CAC, it was a mixed week for the banks. Soc Gen rallied by 2.39%, with BNP Paribas rising by 0.16%. Credit Agricole bucked the trend, however, falling by 0.67%.

It was also a mixed week for the French auto sector. Stellantis NV slid by 2.37%, while Renault rose by 0.68%%.

Air France-KLM fell by 3.69%, while Airbus ended the week up by 1.02%.

On the VIX Index

It was back into the green for the VIX in the week ending 1^st October.

Reversing a 14.7% slide from the previous week, the VIX jumped by 19.15% to end the week at 19.15.

3-days in the green from 5 sessions, which included a 23.93% surge on Tuesday delivered the upside for the week.

For the week, the NASDAQ slid by 3.20%, with the Dow and the S&P500 ending the week down by 1.36% and by 2.21% respectively.

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Early in the week, Italy and Spain’s service sector PMIs for September will be in focus. Finalized PMIs for France, Germany, and the Eurozone will also draw attention, however.

Through the remainder of the week, the focus will then shift to the German economy.

August factory orders, industrial production, and trade data are due out Wednesday through Friday.

Following softer manufacturing PMI numbers last week, expect plenty of sensitivity to the numbers.

From the U.S, it’s also a relatively busy week ahead.

Early in the week, factory orders and ISM Non-Manufacturing PMI numbers will be in focus. Expect the ISM figures to be key.

On Wednesday and Thursday, ADP Nonfarm Employment Change and weekly jobless claims will also influence.

At the end of the week, however, September’s nonfarm payrolls will be the key stat of the week. Another surge in hiring would be considered a green light for the FED to make its first move.

From China, it’s a particularly quiet week ahead, with economic data limited to Caixin Services PMI numbers for September.

While the stats will influence in the week, central bank chatter will also need monitoring…