European Equities: A Week in Review – 03/12/21

The Majors

It was a mixed week for the majors in the week ending 3rd December.

The CAC40 rose by 0.38%, while the DAX30 and the EuroStoxx600 ended the week with losses of 0.57% and 0.28% respectively.

While the economic calendar was on the busier side in the week, market sentiment towards FED monetary policy and COVID-19 did the damage.

Early in the week, FED Chair Powell delivered testimony on Capitol Hill. Powell talked of the need to discuss accelerating the tapering of bond purchases and the need to drop “transitory” in reference to inflation.

For the markets, concerns over the Omicron strain also weighed. Uncertainty over the efficacy of existing vaccines against the new strain tested support for riskier assets. This was exasperated by comments from Moderna CEO Stephane Bancel, who believed that existing vaccines would be less effective against the new strain.

The Stats

Member state and Eurozone inflation and private sector PMIs for November were the key stats.

Inflationary pressures continued to pick up, with the Eurozone’s annual rate of inflation accelerating from 4.1% to 4.9%.

Private sector PMIs were largely market positive, with the Eurozone’s composite PMI up from 54.2 to 55.4.

Other stats included French consumer spending and German unemployment figures, which were mixed.

Consumer spending fell in France, while unemployment fell in Germany. With new restrictions being imposed across member states to curb the spread of COVID-19, the market response was muted.

From the U.S

Early in the week, consumer confidence was in focus. Rising consumer prices and new COVID-19 cases weighed, with the CB Consumer Confidence Index falling from 111.6 to 109.5.

Mid-week, ADP nonfarm payrolls and ISM Manufacturing PMI numbers were market positive, however.

In November, the ADP reported a 534k increase in nonfarm payrolls, with the ISM Manufacturing PMI up from 60.8 to 61.1.

On Thursday, jobless claims increased from 194k to 222k in the week ending 26^th November.

More significantly, however, continuous jobless claims fell from 2,063k to 1,956k. The fall to sub-2,000 was the first since March 2020, when continuous jobless claims had stood at 1,803k on 20^th March.

Continuous jobless claims had peaked at 25,073k back in May 2020.

At the end of the week, nonfarm payrolls and ISM Non-Manufacturing PMI figures were the key stats, however.

In November, nonfarm payrolls rose by just 210k. While the rise was modest, the unemployment rate fell from 4.6% to 4.2%. This was in spite of the participation rate increasing from 61.6% to 61.8%.

Service sector PMIs also impressed, with the ISM Non-Manufacturing PMI rising from 66.7 to 69.1 in November.

While the stats provided direction in the week, FED Chair Powell testimony was pivotal for the markets. The FED Chair talked of the need to discuss speeding up the tapering of bond purchases. Powell also said that the reference to transitory, in relation to inflation, should be removed, raising the chances of a sooner than expected rate hike.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental slid by 5.28% to buck the trend. Daimler and BMW rose by 2.79% and by 2.07% respectively, however, with Volkswagen ending the week up by 0.96%.

It was a relatively bullish week for the banking sector, however. Deutsche Bank ended the week flat, while Commerzbank rose by 1.27%.

From the CAC, it was a bullish week for the banks. Soc Gen rallied by 4.04%, with Credit Agricole and BNP Paribas ending the week with gains of 1.41% and by 1.59% respectively.

The French auto sector had a mixed week, however. Stellantis NV rose by 0.15%, while Renault slid by 3.01%.

Air France-KLM fell by 0.90%, with Airbus ending the week down by 0.82%.

On the VIX Index

It was a 2^nd consecutive week in the green for the VIX in the week ending 3rd December.

Following a 59.8% surge from the previous week, the VIX rose by 7.16% to end the week at 30.67.

3-days in the green from 5 sessions, which included a 18.42% jump on Tuesday and a 14.45% rise on Wednesday delivered the upside.

For the week, the NASDAQ slid by 2.62%, with the Dow and the S&P500 ending the week down by 0.91% and by 1.22% respectively.

The Week Ahead

It’s another busy week ahead on the economic calendar.

Early in the week, the German economy will be in focus, with factory orders and industrial production figures due out.

On Tuesday, ZEW Economic Sentiment figures for Germany and the Eurozone and Eurozone GDP numbers will also influence.

Through the 2^nd half of the week, the focus returns to the German economy, with trade and inflation figures due out.

From elsewhere, jobless claims and inflation figures from the U.S and trade data and inflation figures from China will also influence.

Away from the economic calendar, however, COVID-19 news updates will likely remain a key focal point.