European Equities: A Week in Review – 05/11/21

The Majors

It was another bullish week for the majors in the week ending 5^th November.

The CAC40 led the way, rallying by 3.08%, with the DAX30 and the EuroStoxx600 ending the week with gains of 2.33% and 1.64% respectively.

While softer then in September, private sector PMIs for October and positive economic data from the U.S delivered support.

Corporate earnings and monetary policy were also market positive in the week.

On the monetary policy front, the FED delivered on its plans to begin tapering while downplaying any shift in interest rate policy.

In the week, the ECB also looked to assure the markets that there would be no move on interest rates to curb inflationary pressures.

The Stats

Early in the week, German retail sales and Eurozone and member state Manufacturing PMIs were in focus.

The stats were skewed to the negative.

In September, retail sales slid by 2.5%, reversing a 1.2% increase from August.

There were also downward revisions to German and Eurozone Manufacturing PMIs.

An upward revision to France’s Manufacturing PMI and a jump in sector activity in Italy was of some comfort, however.

In October, the Eurozone’s manufacturing PMI slipped from 58.5 to 58.3.

On Thursday, German factory orders and service sector PMIs for member states and the Eurozone delivered mixed results.

In September, factory orders increased by 1.3%, partially reversing an 8.8% tumble from August.

The Eurozone’s composite PMI fell from 56.2 to 54.2 in October, which was a negative.

At the end of the week, German industrial production and Eurozone retail sales also disappointed.

Industrial production fell by a further 1.1% after having fallen by 4.0% in August.

Retail sales across the Eurozone declined by 0.3%, partially reversing a 1.0% increase from August.

From the U.S

In the first half of the week, private sector PMI and ADP nonfarm employment change figures were in focus.

The stats were skewed to the positive.

In October, the ISM Manufacturing PMI slipped from 61.1 to 60.8, while the Non-Manufacturing PMI rose from 61.9 to 66.7.

According to the ADP, nonfarm payrolls increased by 571k in October, following a 523k rise in September.

On Thursday, jobless claims were also positive. In the week ending 29^th October, initial jobless claims fell from 283k to 269k.

At the end of the week, nonfarm payrolls delivered further market support. In October, nonfarm payrolls increased by 531k after a 312k rise in September.

As a result, the unemployment rate fell from 4.8% to 4.6%.

While the stats were upbeat, the FED’s monetary policy decision was the main event of the week.

In line with market expectations, the FED delivered on tapering, while playing down any shift in interest rate policy. FED Chair Powell continued to stand by the view that the spike in inflation was transitory.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen fell by 0.22% to buck the trend once more. BMW rallied by 5.07%, however, to lead the way, with Daimler rising by 2.49%. Continental ended the week up by a modest 0.19%.

It was a bullish week for the banking sector. Deutsche Bank rose by 0.18%, with Commerzbank rallying by 6.33%, with quarterly earnings delivering support.

From the CAC, it was a bullish week for the banks. Soc Gen rallied by 4.06% to lead the way, with BNP Paribas and Credit Agricole ending the week up by 2.78% and by 1.61% respectively.

It was also a bullish week for the French auto sector. Stellantis NV rose by 2.24%, with Renault rallying by 4.76%.

Air France-KLM jumped by 14.59%, with Airbus ending the week up by 2.98%.

On the VIX Index

It was back into the red for the VIX in the week ending 5^th November, marking a 4^th weekly decline in 5-weeks.

Partially reversing a 5.38% rise from the previous week, the VIX slipped by 0.30% to end the week at 16.48.

2-days in the red from 5 sessions, which included a 5.80% slide on Wednesday delivered the downside.

For the week, the NASDAQ rallied by 3.05%, with the Dow and the S&P500 ending the week up by 1.42% and by 2.00% respectively.

The Week Ahead

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

Early in the week, ZEW Economic Sentiment figures for Germany and the Eurozone and German trade data will be in focus.

While the trade data will draw interest, the ZEW Economic Sentiment figures will likely have a greater impact.

At the end of the week, industrial production figures for the Eurozone wrap things up.

Finalized inflation figures from Germany and Spain are also due out but should have a muted impact on the majors.

From the U.S, inflation figures will be in focus early in the week ahead of the jobless claims on Thursday.

On Friday, consumer sentiment figures will also draw interest.

From elsewhere, trade data from China over the weekend will set the tone ahead of inflation figures on Wednesday.

As central banks stand by the transitory message on inflation, another pickup in inflationary pressure could bring into question whether central banks can stand pat.

Away from the economic calendar, corporate earnings will continue to provide the majors with direction, however.