European Equities: A Week in Review – 05/03/21It was a bullish start to the month for the European majors, supported by impressive manufacturing sector PMIs. Reinflation concerns lingered, however.
After a bearish final week of the month in February, it was a bullish start to the month in March.
The CAC40 rallied by 1.39%, with the DAX30 and the EuroStoxx600 seeing gains of 0.97% and 0.88% respectively.
Through the early part of the week, better than expected manufacturing PMI figures provided the majors with support.
An easing in U.S Treasury yields from the previous week’s spike, however, was the main driver early in the week.
Later in the week, a combination of weak economic data and pickup in yields saw the majors give up some of their earlier gains.
It was a busy week on the economic data front, with February private sector PMIs in focus.
Manufacturing PMI numbers impressed, while the services sector continued to struggle as a result of extended containment measures.
Weighed by service sector woes, the Eurozone’s composite PMI rose modestly from 47.8 to 48.8. The overall picture continued to paint a gloomy picture and reflected the downside risks to the Eurozone economy.
Other stats in the week included German and Eurozone retail sales and unemployment figures and German factory orders.
Retail sales figures were particularly disappointing, while both Germany and the Eurozone’s unemployment rates held steady in January.
At the end of the week, factory orders from Germany impressed, rising by a larger than anticipated 1.4%. More significantly, orders were up by 3.7% when compared with Feb-2020, the month prior to the pandemic.
From the U.S
ISM private sector PMI figures for February also delivered mixed results, For the U.S, manufacturing sector activity picked up, while service sector growth slowed.
The all-important ISM Non-Manufacturing PMI fell from 58.7 to 55.3 in February.
Labor market figures ahead of Friday’s nonfarm payrolls also disappointed.
According to the ADP, nonfarm employment increased by just 117k in February, following a 195k increase in January.
Weekly jobless claims were on the rise in the final week of February, with initial jobless claims increasing from 736k to 745k.
At the end of the week, the government’s official labor market numbers wrapped things up.
Nonfarm payrolls impressed, with a 379K jump in February. The better-than-expected rise took the unemployment rate down from 6.3% to 6.2%.
In January, nonfarm payrolls had risen by a more modest 166k.
On the monetary policy front, FED Chair Powell failed to assure the markets of action to stem the rise in yields on Thursday.
A spike in the Dollar and a sell-off in the U.S equity markets had spilled into the European markets on Friday.
The Market Movers
From the DAX, it was a bullish week for the auto sector. Volkswagen surged by 13.27%, with BMW and Daimler rallying by 6.18% and by 6.52% respectively. Continental ended the week up by a more modest 3.53%.
It was also a bullish week for the banking sector. Deutsche Bank rallied by 4.40%, with Commerzbank gaining 1.47%.
From the CAC, it was yet another particularly bullish week for the banks. Credit Agricole rallied by 5.25%, with BNP Paribas and Soc Gen gaining 4.69% and 3.90% respectively.
It was a relatively bullish week for the French auto sector. Renault and Stellantis NV ended the week up by 1.91% and by 3.85% respectively.
Air France-KLM slid by 7.17%, with Airbus ending the week down by 0.51%.
On the VIX Index
It was back into the red for the VIX in the week ending 5th March. Partially reversing a 26.76% jump from the previous week, the VIX fell by 11.77% to end the week at 24.66.
The VIX had been on track for a 3rd consecutive weekly gain before a Friday rebound from early losses across the U.S equity markets.
For the week, the NASDAQ fell by 2.06%, while the Dow and the S&P500 rose by 1.82% and by 0.81% respectively.
The Week Ahead
It’s a relatively busy week ahead on the economic calendar.
From Germany, industrial production and trade figures for January are due out on Monday and Tuesday.
Expect the industrial production figures to have the greatest impact on the majors.
On Tuesday, finalized 4th quarter GDP numbers for the Eurozone will also draw interest ahead of Eurozone industrial production figures on Friday.
On the inflation front, finalized inflation figures from Germany and Spain are due out at the end of the week. Barring marked upward revisions, however, these should have a muted impact on the majors.
While the stats will provide direction, it will be the ECB press conference on Thursday, however, that will be the main event.
With the markets expecting the ECB to stand past on policy, Lagarde’s view on inflation, yields and the impact on the economy and monetary policy will be key.
From the U.S, the economic calendar is on the lighter side.
On Wednesday, February inflation figures will draw interest ahead of the weekly jobless claim figures on Thursday.
At the end of the week, prelim March consumer sentiment figures will also influence late in the European session.
Following FED Chair Powell’s comments from last week, FOMC member chatter in the week ahead will also need monitoring.