European Equities: A Week in Review – 09/04/21Optimism and assurances of unwavering central bank support delivered for the majors in the week. It’s a busier week ahead, with earnings also in the mix.
It was a relatively bullish week for the European majors in the week ending 9th April, following solid gains from the week prior.
The CAC40 and the EuroStoxx600 rose by 1.09% and by 1.16% respectively, with the DAX ending the week up by 0.84%.
Economic data through the week delivered mixed results. Survey-based PMI numbers continued to show improving conditions across the services sector.
Stats from Germany were mixed, however, coinciding with the ECB monetary policy meeting minutes that warned of downside risks near-term.
In spite of a mixed week on the data front, optimism continued to support the European majors.
Assurances of unwavering support from the FED and the ECB’s pledge to ramp up bond purchases were market positives.
Plans by the EU to ramp up vaccinations in the coming weeks, with some member states hit record daily vaccination numbers in the week was also positive. Vaccine shortages for the EU has been an ongoing concern as member states struggle with lockdown measures.
Mid-week, service sector PMIs for March were in focus.
The stats were skewed to the positive, with only Italy reporting a decline in its services PMI.
For the Eurozone, the composite PMI increased from 48.8 to 53.2, which was up from a prelim 52.5. A return to growth across the private sector came in spite of containment measures across a number of Eurozone member states.
From Germany, factory orders, industrial production, and trade data were also in focus.
Orders rose for a 2nd consecutive month, driven by domestic demand.
Industrial production and trade data disappointed, however.
Industrial production fell by 1.6% in February, month-on-month, following a revised 2% decline in January. Economists had forecast a 1.5% rise.
In February, Germany’s trade surplus narrowed from €22.2bn to €19.1bn, versus a forecasted narrowing to €20.0bn.
On the monetary policy front, the ECB meeting minutes also influenced. While highlighting downside risks to the economy near-term, optimism was evident over the medium-term outlook.
In line with Lagarde’s assurances from the press conference, the minutes revealed a plan to ramp up bond purchases in the near-term. The minutes did discuss a quarterly review, however…
From the U.S
It was a mixed set of numbers for the Greenback.
The market’s preferred ISM Non-Manufacturing PMI rose from 55.3 to 63.7 in March. It was the only positive, however.
In February, factory orders fell by 0.8%, partially reversing a 2.7% rise from January.
Jobless claims figures were also disappointing, with initial jobless claims increasing from 728k to 744k in the week ending 2nd April. Economists had forecast a fall to 680k.
Other stats in the week included Jolt’s job openings, trade data, wholesale inflation, and Markit service PMIs.
These stats had a relatively muted impact on the Dollar and the broader markets, however.
On the monetary policy front, the FOMC meeting minutes reaffirmed FED Chair Powell’s stance on low for longer. Late in the week, Powell also delivered a speech talking of the need for unwavering monetary policy support.
The Market Movers
From the DAX, it was a bearish week for the auto sector. Continental slid by 2.66%, with BMW and Volkswagen declining by 0.92% and by 1.25% respectively. Daimler ended the week with more modest 0.41% loss.
It was another mixed week for the banking sector, however. Deutsche Bank rose by 0.58%, while Commerzbank slid by 3.44%.
From the CAC, it was a mixed week for the banks. Credit Agricole rose by 0.72%, while BNP Paribas and Soc Gen ending the week with losses of 1.32% and 3.44% respectively.
It was a bearish week for the French auto sector. Renault slid by 5.66%, with Stellantis NV ending the week down by 1.41%.
Air France-KLM and Airbus found further support from the week prior, gaining 5.06% and 0.68% respectively.
On the VIX Index
It was a 3rd consecutive week in the red for the VIX in the week ending 9th April. Following on from an 8.11% decline from the previous week, the VIX fell by 3.69% to end the week at 16.69.
3 consecutive days in the red that included a 5.3% slide on Wednesday left the VIX in the red for the week.
For the week, the NASDAQ ended the week up by 3.12%, with the Dow and the S&P500 gaining by 1.95% and 2.71% respectively.
The Week Ahead
It’s another busy week ahead on the economic calendar.
Early in the week, Eurozone retail sales and ZEW economic sentiment figures for Germany and the Eurozone will be in focus.
While consumer spending is key to the economic recovery, sensitivity to ZEW sentiment figures has picked up recently.
Mid-week, Eurozone industrial production figures are due out ahead of Eurozone trade figures on Friday.
Throughout the week, member state and Eurozone prelim inflation figures will also draw attention.
From the U.S, it’s a busy week ahead.
Early in the week, March inflation figures are due out ahead of a particularly busy Thursday.
Retail sales, jobless claims, industrial production, and Philly FED Manufacturing PMI numbers are due out.
We would expect the retail sales and jobless claim figures to have the greatest impact on the Dollar and market risk sentiment.
At the end of the week, prelim consumer sentiment figures for April wrap things up.
From elsewhere, stats from China will have a material impact on market risk sentiment in the week.
Early in the week trade data will draw attention. The markets are looking for a continued improvement in global trade terms.
At the end of the week, 1st quarter GDP numbers will be the key driver, however.
Other stats from China on Friday include industrial production, fixed asset investment, retail sales, and unemployment numbers.
Away from the economic calendar, geopolitics and COVID-19 news updates will need monitoring in the week.
Corporate earnings season also kicks off, with the markets expecting strong results…