European Equities: A Week in Review – 06/08/21

The Majors

It was a bullish week for the majors in the week ending 6^th August.

The CAC40 rallied by 3.09%, with the DAX30 and the EuroStoxx600 ending the week with gains of 1.40% and 1.89% respectively.

Corporate earnings delivered support for the majors in the week, with economic data also skewed to the positive.

While corporate earnings delivered support, the market focus was on U.S nonfarm payrolls in the week. Following a sharp pickup in U.S service sector activity in July, an accompanying sharp increase in payrolls was viewed as a cue for the FED to begin a more meaningful discussion on a shift in policy.

For the majors, another marked pickup in nonfarm payrolls also eased concerns over the pace of the U.S economic recovery.

The continued spread of the Delta variant and possible impact on the economic recovery did limit the upside, however.

The Stats

Private sector PMIs and the German economy were in focus.

While the private sector PMIs were mixed in the week, the Eurozone’s composite PMI rose from 59.2 to a 15-year high 60.2. This was down from a prelim 60.6%, however.

Non-survey-based stats from Germany in the week were also skewed to the positive.

The numbers were aligned with Germany’s private sector PMI figures that saw Germany rise to the top of the euro bloc PMI table.

In June, retail sales jumped by 4.2%, with factory orders up 4.1%, month-on-month.

Industrial production was negative, however, with production down 1.3% in June. Following a 0.8% fall in May, economists had forecast a 0.5% rise in spite of factory orders having fallen in May.

From the ECB, the Economic Bulletin was also in focus. While the Bulletin talked of a strong economic rebound, with stronger growth to come, the ECB did talk of downside risks stemming from the Delta variant.

The ECB also continued to reiterate its unwavering support on the monetary policy front.

From the U.S

Key stats in the week included private sector PMI figures for July and labor market data.

While the ISM Manufacturing PMI fell from 60.6 to 59.6, the Non-Manufacturing PMI jumped from 60.1 to 64.1.

The marked increase in the non-manufacturing PMI raised the prospects of a sooner rather than later move by the FED.

Labor market figures mid-week tempered a Dollar surge, however.

According to the ADP, nonfarm payrolls increased by just 330k in July, falling well short of a forecasted 715k rise.

Weekly jobless claims fell from 399k to 385k in the week ending 30^th July.

The key numbers of the week, however, were the July nonfarm payroll figures on Friday.

In July, the U.S added 943k jobs, with nonfarm payrolls having risen by an upwardly revised 938k in June. As a result of the marked increase, the unemployment rate fell from 5.9% to 5.4%.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 1.04% to lead the way, with Continental and Volkswagen gaining 0.19% and 0.44% respectively. BMW bucked the trend, however, falling by 2.33%.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.03%, while Commerzbank fell by 2.39%.

From the CAC, it was a bullish week for the banks. Soc Gen surged by 11.32%, with BNP Paribas and Credit Agricole rallying by 4.96% and by 4.42% respectively.

The French auto sector also found strong support with Stellantis NV and Renault seeing gains of 10.40% and 7.06% respectively.

Air France-KLM rallied by 4.24%, with Airbus rising by 1.04%.

On the VIX Index

It was back into the red for the VIX, which saw red for just the 2^nd time in 5 weeks.

In the week ending 6^th August, the VIX fell by 11.46%. Partially reversing a 6.05% gain from the previous week, the VIX ended the week at 16.15.

4-days in the red from 5 sessions, which included a 7.30% fall on Tuesday delivered the downside.

For the week, the NASDAQ rose by 1.11%, with the Dow and the S&P500 ending the week up by 0.78% and by 0.94% respectively.

The Week Ahead

It’s a relatively quiet week ahead on the economic calendar.

German trade figures get things going, with ZEW Economic Sentiment figures also in focus on Tuesday.

The focus will then shift to industrial production and trade data for the Eurozone in the 2^nd half of the week.

Finalized inflation figures for member states are also due out but will likely have a muted impact on the majors.

From the U.S, Inflation, jobless claims, and consumer sentiment figures will influence in the week.

Away from the economic calendar, COVID-19 news updates and corporate earnings will also need monitoring.