European Equities: A Week in Review – 04/06/21

The Majors

It was a relatively bullish week for the majors in the week ending 4^th June.

The DAX30 rose by 1.11% to lead the way, with the CAC40 and the EuroStoxx600 ending the week up by 0.49% and by 0.78% respectively.

Economic data from the Eurozone continued to support the market’s optimistic economic outlook in the week.

The Eurozone’s composite PMI hit a record high in May, driving the DAX30 and the EuroStoxx600 to record highs in the week.

Through the week, economic data from the U.S had also been positive. Impressive labor market data ahead of Friday’s non-farms had raised the prospects of a near-term move by the FED.

Friday’s weaker than expected non-farm payrolls may have eased immediate pressure on the FED to act, however, providing riskier assets with further support.

Key to the upside for the European majors continued to be the unwavering support of the ECB ahead of next week’s policy decision.

The Stats

Private sector PMIs, and German and Eurozone unemployment and retail sales figures were in focus.

Early in the week, manufacturing sector PMI numbers for May impressed. The Eurozone’s PMI hit a new record high. The Netherlands, Italy, Ireland, and Austria also recorded record highs in the month.

Unemployment figures were also positive. In April, the Eurozone’s unemployment rate fell from 8.1% to 8.0%. In Germany, unemployment fell by a larger than expected 15k to leave the unemployment rate unchanged at 6.0% in May.

Mid-week, retail sales figures from Germany did disappoint, however, with sales down 5.5% in April. In March, retail sales had risen by 7.7%.

In the 2^nd half of the week, service sector activity and retail sales figures for the Eurozone were in focus.

For May, the Eurozone’s Composite PMI came in at 57.1. This was up from an April 53.8 and a prelim 56.9.

At the end of the week, Eurozone retail sales figures had a muted impact on the EUR following weak numbers from France and Germany.

From the U.S

On Tuesday, the ISM Manufacturing PMI rose from 60.7 to 61.2, supporting the market optimism towards the economic outlook.

The markets then needed to wait until Thursday and Friday for the key stats of the week.

ADP nonfarm employment change and weekly jobless claims were in focus along with the market’s favored ISM Non-Manufacturing PMI figures for May.

In May, nonfarm payrolls jumped by 978k according to the ADP, coming in ahead of a forecasted 650k increase. In April, nonfarm payrolls had risen by 654k.

Initial jobless claim figures also impressed. In the week ending 28^th May, initial jobless claims fell from 405k to 385k. Economists had forecast a decline to 390k.

Service sector PMI numbers were also positive, with the ISM Non-Manufacturing PMI climbing from 62.7 to 64.0. Economists had forecast an increase to 63.0.

At the end of the week, it was another story, however, delivering further support to the majors.

Nonfarm payrolls increased by just 559k in May, falling well short of the ADP’s figures. Economists had forecast a 650k increase following April’s 278k rise.

A fall in the participation rate and increase in payrolls did support a fall in the unemployment rate, however.

In May, the U.S unemployment rate fell from 6.1% to 5.8%.

The Market Movers

From the DAX, it was another bullish week for the auto sector. BMW rallied by 8.53% to lead the way, with Continental and Volkswagen gaining 5.50% and 6.04% respectively. Daimler ended the week up by a more modest 3.73%.

It was a relatively bullish week for the banking sector. Deutsche Bank rose by 0.32%, with Commerzbank ending the week the week up by 2.42%.

From the CAC, it was a relatively bullish week for the banks. Credit Agricole rose by 0.57%, with BNP Paribas and Soc Gen seeing gains of 1.12% and 1.03% respectively.

It was a bullish week for the French auto sector. Stellantis NV rallied by 6.73%, with Renault rising by 0.18%.

Air France-KLM ended the week down by 1.19%, while Airbus rose by 1.78%.

On the VIX Index

It was a 2^nd consecutive week in the red for the VIX in the week ending 4^th June. Following a 16.82% slide from the week prior, the VIX fell by 2.03% to end the week at 16.42.

2-days in the red from 4 sessions, which included an 8.48% fall on Friday delivered the downside in the week.

For the week, the NASDAQ rose by 0.48%, with the Dow and the S&P500 ending the week up by 0.66% and by 0.61% respectively.

The Week Ahead

It’s a quieter week ahead on the economic calendar.

Through the 1^st half of the week, the German economy will be back in focus.

Factory orders, industrial production, and trade data for April will provide the majors with direction Monday through Wednesday.

Expect plenty of interest in the numbers following April and May’s private sector PMIs.

ZEW Economic Sentiment figures for Germany and the Eurozone will also influence on Tuesday.

Finalized 1^st quarter GDP numbers for the Eurozone and finalized inflation figures from Spain should have a muted impact on the majors in the week, however.

On the monetary policy front, the ECB monetary policy decision and press conference will be the key driver. While the markets are expecting the ECB to stand pat on policy, assurances of a hold on policy will be needed to support the majors. Any talk of a tapering to the asset purchasing program would weigh…

From the U.S, inflation and jobless claims due out on Thursday will also provide the majors with direction.

Trade data (Mon) and inflation figures (May) from China will also influence in the week.