European Equities: A Week in Review – 07/05/21

The Majors

It was a bullish week for the European majors in the week ending 7^th May, with the EuroStoxx600 closing out at a record high on Friday.

The CAC40 rose by 1.85%, with the DAX30 and the EuroStoxx600 ended the week up by 1.74% and by 1.69% respectively.

Corporate earnings and a pickup in the vaccination rate across the EU provided the European majors with support.

Private sector PMIs from member states and the Eurozone and economic data from Germany were also positive, adding to the upside in the week.

The Stats

Through the 1^st half of the week, private sector PMI figures for April were in focus.

Manufacturing sector activity continued to lead the way. The Eurozone’s Manufacturing PMI rose from 62.5 to 62.9. Service sector activity across the Eurozone also returned to growth, with the Eurozone services PMI rising from 49.6 to 50.5.

Other stats in the week included German retail sales, industrial production, and trade data.

These stats were also positive for the European majors. While Germany’s trade surplus narrowed, both retail sales and industrial production were on the rise in March.

Even the narrowing of the trade surplus was positive. A larger jump in imports than exports pointed to increased demand.

From the ECB, the Economic Bulletin was also in focus. While talking of uncertainty near-term, there was optimism over the medium term, which was market positive.

From the U.S

It was a mixed set of numbers from the U.S.

Both the manufacturing and services sector saw slower growth in April, according to the market’s preferred ISM surveys.

Ahead of Friday’s nonfarm payroll figures, however, labor market numbers were upbeat.

In April, nonfarm payrolls increased by 742k in April according to the ADP. Payrolls had risen by 565k in March.

The weekly jobless claims figures were also upbeat. In the week ending 30^th April, initial jobless claims fell from 590k to 498k.

At the end of the week, market optimism overshadowed disappointing official nonfarm payrolls and unemployment figures.

In April, nonfarm payrolls rose by just 266K, falling well short of a forecasted 978k rise. The participation rate ticked up from 61.5% to 61.7%, contributing to a rise in the unemployment rate from 6.0% to 6.1%.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen slid by 2.65%, with Daimler falling by 1.19%. BMW and Continental found support, however, rising by 0.67% and by 1.56% respectively.

It was also a mixed week for the banking sector. Deutsche Bank slipped by 0.43% after the previous week’s 18.43% jump, while Commerzbank rose by 2.19%.

From the CAC, it was a bullish week for the banks. Soc Gen led the way, rallying by 5.24%, with BNP Paribas gaining 2.60%. Credit Agricole ended the week flat, however.

It was another bullish week for the French auto sector. Stellantis NV rallied by 8.18%, with Renault ending the week up by 1.85%.

Air France-KLM slipped by 0.15%, with Airbus falling by 1.57%.

On the VIX Index

It was back into the red for the VIX in the week ending 7^th May. Marking a 7^th weekly fall in 10-weeks, the VIX fell by 10.32%. Reversing a 7.39% gain from the previous week, the VIX ended the week at 16.69.

4-days in the red from 5 sessions, which included a 9.24% fall on Friday, delivered the downside in the week for the VIX.

For the week, the Dow and the S&P500 ended the week up by 2.67% and by 1.23% respectively, while the NASDAQ fell by 1.51%.

The Week Ahead

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

On Tuesday, German and Eurozone ZEW economic sentiment figures for May will provide the EUR with direction.

Expect the numbers to influence.

The focus will then shift to industrial production figures for the Eurozone on Wednesday. With little else for the markets to consider, we can expect some sensitivity to the numbers.

Through the 2^nd half of the week, finalized inflation figures from Germany, France, and the Eurozone are also due out. Barring marked revision from prelim numbers, however, we don’t expect too much influence on the majors.

From the U.S, inflation figures for April should have a muted impact on the majors following the FED’s latest reassurances.

Wholesale inflation and jobless claims figures will be in focus on Thursday.

While wholesale inflation figures will draw interest, the markets will be looking for another fall in jobless claims. Avoiding a return to 500k levels should support riskier assets.

At the end of the week, retail sales, industrial production, and prelim consumer sentiment figures wrap things up.

Expect the retail sales and consumer sentiment figures to be the key drivers.