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Bob Mason
Growing Euro notes arrows over the flag of European Union.

The Majors

It was a bullish week for the European majors in the week ending 3rd July. Reversing last week’s 1.96% loss, the DAX30 rallied by 3.63% to lead the way. The CAC40 and EuroStoxx600 saw more modest gains of 1.99% and 1.98% respectively.

Throughout the week, positive economic data and news of progress towards a COVID-19 vaccine delivered the upside in the week.

A pullback on Friday limited the gains, however, as the markets capped a solid week of gains, with the U.S markets closed.

Progress towards a COVID-19 vaccine was supportive, but a continued rise in new cases across the U.S remained a concern.

The Stats

It was a busy week on the Eurozone economic calendar.

Key stats included June’s private sector PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone.

Germany’s unemployment figures for June and May’s consumer spending figures from France and Germany were also in focus.

There were few disappointments in the week, with France’s private sector returning to expansion in June. Both the manufacturing and services sectors reported an expansion in the month.

For the rest of the member states, a slower pace of contraction led to a rise in the Eurozone’s composite PMI from 31.9 to 48.5.

Unemployment figures from Germany were better than anticipated, with consumer spending rebounding in May.

The easing in lockdown measures supported the bounce back in spending and pickup in service sector activity in particular.

From the U.Snews

It was a mixed week on the day data front…

Private sector PMI numbers and the all-important nonfarm payrolls impressed in a shortened week. In June, nonfarm payrolls surged by a record 4.8m, following on from a 2.699m rise in May.

Initial jobless claims remained a concern, however, with jobless claims rising by 1.427m in the week ending 26th June.

From Elsewhere

Private sector PMIs from China also provided support, with the private sector seeing activity pick up in June. Weak overseas demand remained a concern at the turn of the quarter, however.

The Market Movers

From the DAX, it was a bullish week for the auto sector. BMW and Daimler led the way, rallying by 5.35% and by 3.00% respectively. Continental and Volkswagen saw more modest gains of 2.67% and 2.50% respectively.

It was also a bullish week for the banking sector. Commerzbank rallied by 9.91%, with Deutsche Bank gaining 4.85%.

From the DAX30, the story of the week was WIRECARD AG once more. Following a 94.15% slump last week, WIRECARD AG ended the week up by 131.21%.

From the CAC, it was a bullish week for the banks. Credit Agricole rallied by 7.92% to lead the way. BNP Paribas and Soc Gen weren’t far behind, with gains of 5.19% and 5.39% respectively.

The French auto sector also found support from the positive stats, with Peugeot and Renault rising by 3.18% and by 6.34% respectively.

Air France-KLM and Airbus found much-needed support, with the pair rising by 5.17% and by 6.06% respectively.

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On the VIX Index

It was another week in the red, with the VIX seeing red for 3rd consecutive week. In the week ending 3rd July, the VIX tumbled by 20.3%. Following on from a 1.11% fall from the previous week, the VIX ended the week at 27.68.

Economic data from the U.S and beyond allowed the markets to look past the continued upward trend in new COVID-19 cases.

The S&P500 ended the week up by 4.02%, with the Dow and NASDAQ gaining 3.25% and by 4.62% respectively.

The Week Ahead

It’s a quieter week ahead on the Eurozone economic calendar. Key stats include May’s factory orders, industrial production, and trade figures from Germany.

The markets will likely brush aside the Eurozone’s retail sales figures for May.

From elsewhere

Expect ISM Non-Manufacturing numbers from the U.S to also provide direction in the early part of the week.

With economic data on the lighter side, we can expect COVID-19 and geopolitics to take center stage.

The markets will need to receive news of more progress towards a COVID-19 vaccine and for U.S states to resume reopening. It’s a combination that may not be forthcoming when looking at the upward trend in new cases.

On the geopolitical front, China is back in focus, following last week’s events. Expect any rise in tensions to test risk appetite in the week. From the EU, any chatter on the Recovery Fund will also influence.

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