European Equities: A Week in Review – 03/06/22

The Majors

It was a bearish week for the European majors in the week ending June 3, 2022.

The EuroStoxx600 fell by 0.87%, with the CAC40 and the DAX seeing losses of 0.47% and 0.01%, respectively.

A pickup in inflationary pressure and disappointing private sector PMI figures weighed on the European majors. The pickup in inflationary pressure supported the ECB’s planned shift in monetary policy.

From the US, hawkish FOMC member chatter and nonfarm payrolls added pressure, with the pickup in hiring supporting a more aggressive Fed interest rate path trajectory.

Economic data from China reflected the impact of the prolonged COVID-19 lockdown measures on the economy.

The services and manufacturing sectors continued to contract, albeit at a slower pace. In May, the NBS manufacturing PMI increased from 47.4 to 49.6, with the services PMI up from 41.9 to 47.8.

The all-important Caixin manufacturing PMI rose from 46.0 to 48.1.

The Stats

It was a particularly busy week on the Eurozone economic calendar.

Key stats included private sector PMI and inflation figures for member states and the Eurozone.

A pickup in inflationary pressure, according to prelim figures for May, pressured the majors.

The Eurozone’s annual rate of inflation accelerated from 7.4% to 8.1%.

Private sector PMIs disappointed, however.

In May, the Eurozone’s manufacturing PMI fell from 55.5 to 54.6, with the services PMI down from 57.7 to 56.1. As a result, the composite PMI slipped from 55.8 to 54.9.

On the monetary policy front, bets of a move away from negative rates also tested support.

From the US

In the first half of the week, consumer confidence and manufacturing PMI numbers delivered Dollar support.

The CB Consumer Confidence Index fell from 108.6 to 106.4, while the ISM Manufacturing PMI rose from 55.4 to 56.1. Economists forecast the CB Consumer Confidence Index to fall to 103.9.

On Thursday, ADP nonfarm employment change figures disappointed ahead of the all-important NFP numbers on Friday.

Nonfarm payrolls increased by 390k in May, following a 436k jump in April. Despite the increase, the unemployment rate held steady at 3.6% due to a pickup in the participation rate from 62.2% to 62.3%.

The Market Movers

From the DAX, it was a bullish week for the auto sector. BMW and Volkswagen rose by 2.67% and by 2.92%, respectively. Continental and Daimler saw gains of 1.53% and 2.01%, respectively.

It was a mixed week for the banking sector. Deutsche Bank fell by 1.85%, while Commerzbank rose by 0.99%.

From the CAC, it was also a mixed week for the French banks. Soc Gen gained 0.40%, while Credit Agricole slid by 11.20%. BNP Paribas ended the week down by 1.85%.

The French auto sector had a mixed week. Stellantis NV slipped by 0.03%, while Renault rose by 2.34%.

Air France-KLM slid by 4.74%, with Airbus ending the week down 2.84%.

On the VIX Index

In the week ending June 3, the VIX fell for a fourth week in five.

Following a 12.61% loss from the previous week, the VIX fell by 3.62% to end the week at 24.79.

2-days in the red from 4 sessions, which included a 1.91% decline on Wednesday did the damage.

For the week, the S&P500 fell by 1.20%, with the Dow and the NASDAQ seeing losses of 0.94% and 1.20%, respectively.

The Week Ahead

It is another busy week on the Eurozone economic calendar.

German factory orders and industrial production figures will draw market interest on Tuesday and Wednesday.

The markets will also look for any revisions to Eurozone GDP numbers on Wednesday ahead of the ECB interest rate decision on Thursday.

With the markets expecting the ECB to leave rates unchanged, the focus will be on ECB President Christine Lagarde and the press conference.

From the US, jobless claims and inflation figures for May will draw plenty of interest. Another spike in inflation would test support for riskier assets.

Economic data from China will also influence. Trade and inflation numbers are due out on Thursday and Friday.