European Equities – A Week in Review – 08/10/2021

The Majors

It was a bullish week for the majors in the week ending 8^th October. The EuroStoxx600 rose by 0.96%, with the DAX30 and the CAC40 ending the week with gains of 0.33% and by 0.65% respectively.

Disappointing economic data from Germany pegged the DAX30 back in the week, however.

Upward revisions to service sector PMIs for France, Germany, and the Eurozone and positive data from the U.S delivered support.

Also positive for the markets was progress on Capitol Hill towards an agreement on the debt ceiling.

The Stats

Early in the week, service sector PMIs for September were in focus.

Member Stats

Italy’s Services PMI fell from 58.0 to 55.5 versus a forecasted 56.5, with Spain’s down from 60.1 to 56.9. Economists had forecast a PMI of 58.0.

Finalized numbers from France and Germany also disappointed.

The French Services PMI slipped from 56.3 to 56.2, which was up from a prelim 56.0.

Germany’s Services PMI slid from 60.8 to 56.2 in September, which was up from a prelim 56.0.

The Eurozone

As a result of the better numbers from France and Germany, the Eurozone’s Services PMI fell from 59.0 to 56.4 which was up from a prelim 56.3.

In September, the Composite PMI declined from 59.0 to 56.2, which was up from a prelim 56.1.

Through the 2^nd half of the week, the German economy was in focus, with the stats skewed to the negative.

Factory orders tumbled by 7.7% in August, with industrial production falling by 4.0%.

Germany’s trade surplus narrowed from €17.9bn to €13.0bn versus a forecasted narrowing to €15.8bn.

While the stats were key, the ECB monetary policy minutes were also in focus late in the week.

There were no major surprises, however, with the markets and the ECB more concerned with the impact of the latest inflation figures on policy.

From the U.S

Early in the week, factory orders and ISM Non-Manufacturing PMI figures were in focus.

Factory orders rose by 1.2%, with the ISM Non-Manufacturing PMI increasing from 61.7 to 61.9.

There had been plenty of focus on the PMI, with particular attention to the employment and inflation sub-components.

In September, the employment sub-index fell modestly from 53.7 to 53.0. Inflationary pressures picked up, however, with the sub-index rising from 75.4 to 77.5.

On Wednesday, the ADP’s nonfarm figures had a relatively muted impact on the markets. In recent months, significant divergence from the government figures has watered down the impact on the markets.

Nonetheless, in September the ADP reported a 568k increase in nonfarm payrolls following a 340k increase in August.

On Thursday, jobless claims drew attention ahead of September’s NFP numbers on Friday.

In the week ending 1^st October, initial jobless claims fell from 364k to 326k.

More significantly, however, nonfarm payrolls rose by just 194k in September, falling well short of a forecasted 500k rise. While falling short, the unemployment rate fell from 5.2% to 4.8%, partly as a result of a lower participation rate.

The Market Movers

From the DAX, it was another mixed week for the auto sector. Continental and Daimler led the way, both rallying by 4.44%. BMW also found support, rising by 0.99%, while Volkswagen fell by 1.91%.

It was a bullish week for the banking sector. Deutsche Bank rose by 3.30%, with Commerzbank ending the week up by 8.68%.

From the CAC, it was a bullish week for the banks. Soc Gen and BNP Paribas ended the week up by 4.78% and by 3.84%. Credit Agricole led the way, however, rallying by 8.54%.

It was a relatively bullish week for the French auto sector. Stellantis NV and Renault rose by 1.09% and by 1.62% respectively.

Air France-KLM fell by 5.97%, with Airbus ending the week down by 2.88%.

On the VIX Index

It was back into the red for the VIX in the week ending 8^th October.

Partially reversing a 19.15% jump from the previous week, the VIX slid by 11.25% to end the week at 18.77.

4-days in the red from 5 sessions, which included a 7.23% slide on Tuesday delivered the downside for the week.

For the week, the NASDAQ rose by 0.09%, with the Dow and the S&P500 ending the week up by 1.22% and by 0.79% respectively.

The Week Ahead

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

Early in the week, ZEW economic sentiment figures for Germany and the Eurozone will be in focus.

For the Eurozone, industrial production and trade data will also draw attention on Wednesday and Friday.

With market sensitivity to inflation heightened, finalized September inflation figures for member states will influence in the week. Expect any upward revisions to prelim figures to test support for the majors.

From the U.S, inflation figures on Wednesday will be key along with retail sales figures on Friday.

Following relatively disappointing NFP numbers from last week, weekly jobless claims will also influence on Thursday.

Out of China, trade data and inflation figures for September will need considering on Wednesday and Thursday.

Away from the economic calendar, central bank chatter and geopolitics will also be in focus.