European Equities: A Week in Review – 04/10/19

A positive end to the week failed to ease the pain as private sector PMI figures from the Eurozone and the U.S weighed.
Bob Mason
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The Majors

It was another week in the red for the European majors. The DAX30 led the way down, falling by 2.97%, with the EuroStoxx600 and CAC40 declining by 2.95% and by 2.70% respectively.

Through the week, economic data from the Eurozone and the U.S ultimately did the damage, with geopolitics taking a backseat for a change.

Geopolitics

Sentiment towards the U.S – China trade war was negative from the start of the week. News of the U.S planning to curb investments into China was the negative, though had a relatively muted impact on Monday.

With impeachment talks and Brexit also in focus in the week, there was little support for the majors.

Monetary Policy

Dire economic data from the U.S suggests the FED may need to do more in the months ahead. Economic data out of the Eurozone was not much better, however, which will give Draghi’s replacement an early test…

The Stats

It was a particularly busy week on the Eurozone economic calendar. The week kicked off on a positive note, with German retail sales and German and Eurozone unemployment numbers supporting a positive end to the quarter.

Through the rest of the week, however, it was doom and gloom. Private sector PMI numbers from both the Eurozone and the U.S did the damage.

With Germany’s private sector contracting for the first time since April 2013, the Eurozone’s composite fell to its lowest level since June 2013.

The Markit survey showed that growth in Spain and Ireland moderated, with France only seeing modest growth.

New business weighed at the end of the quarter, with new business across the bloc falling at the most accelerated pace since mid-2013.

By ranking, Spain came out on top, with a 2-month low composite PMI.

A 0.3% rise in Eurozone retail sales figures in August eased the pain, though slowing service sector activity will be a concern…

The Market Movers

From the DAX, it was another bearish week for the auto sector. Volkswagen and Daimler and led the way down with losses of 3.52% and 2.44% respectively. BMW and Continental saw more modest losses of 1.70% and 1.53% respectively.

Things were no better for the banking sector. Deutsche Bank slid by a further 5.50%, while Commerzbank tumbled by 8.42%, following on from the previous week’s 6.12% loss.

Dire manufacturing PMI numbers out of Germany and negative sentiment towards the U.S – China trade war weighed on the autos. For the banks, more global economic doom and gloom hit government bond yields and the financial sector.

From the CAC, the banks also struggled. BNP Paribas and Credit Agricole fell by 4.31% and by 4.86% respectively. Soc Gen led the way, however, sliding by 6.19%. French autos saw red for a third consecutive week. Peugeot slide by 6%, with Renault falling by 5.20%.

On the VIX Index

The VIX Index fell by 0.7% in the week. Following a 3.12% gain from the previous week, the VIX ended the week at 17.

Following a string of weak numbers out of the Eurozone and the U.S, risk-on sentiment on Friday reversed gains from earlier in the week.

U.S unemployment figures ultimately weighed on Friday, with the U.S unemployment rate falling to 3.5%.

The Week Ahead

It’s a quieter week on the Eurozone economic calendar. Key drivers include German factory orders, industrial production and trade data.

Finalized inflation figures out of Germany and Spain will likely have a muted impact on the majors.

From elsewhere, service sector PMI numbers from China and inflation and JOTLs job opening figures from the U.S will also influence

With the economic calendar on the lighter side, however, geopolitics will likely recapture the market’s attention.

U.S – China trade talks are set to resume and there’s also Brexit to factor in. Time is running out for Boris Johnson and the Pound…

For the U.S President, impeachment talk will be an unwanted distraction.

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