European Equities: A Week in Review – 10/12/21

The Majors

It was a bullish week for the majors in the week ending 10^th December.

The CAC40 rallied by 3.34%, with the DAX30 and the EuroStoxx600 ending the week with gains of 2.99% and 2.76% respectively.

Upbeat economic data and a marked shift in sentiment towards the new Omicron strain provided the majors with support in the week.

While early lab tests showed that the new strain was more contagious, there were also early indications that the effects of the new strain were milder.

In the week, the upside for the majors came in spite of a further pickup in inflation, with U.S inflation accelerated once more in November.

The Stats

It was a busy week, with the German economy in focus through much of the week.

In October, German factory orders slid by 6.9% after having risen by 1.8% in September. Industrial production rose by 2.8%, however, reversing a 0.5% decline from September.

Alongside factory orders, trade data and economic sentiment figures for Germany also disappointed, however. In October, Germany’s trade surplus narrowed from €12.9bn to €12.5bn.

For December, the ZEW Economic Sentiment index fell from 31.7 to 29.9. This was in contrast to the Eurozone’s ZEW Economic Sentiment index, which rose from 25.9 to 26.8.

Other stats in the week included Eurozone GDP, French nonfarm payrolls, and finalized German inflation figures. These stats had a muted impact on the majors, however.

From the U.S

Following disappointing NFP numbers for November, JOLT’s job openings and weekly jobless claims were market positive.

In October, job openings climbed from 10.602m to 11.033m. Of greater significance, was a fall in jobless claims. In the week ending 3^rd December, initial jobless claims fell from 227k to 184k.

While both sets of numbers were Dollar positive, inflation figures were key at the end of the week.

In November, the U.S core annual rate of inflation picked up from 4.6% to 4.9%, with core consumer prices up 0.5% in the month. Core consumer prices had risen by 0.6% in October.

While inflationary pressures picked up once, consumer sentiment improved. In December, the Michigan Consumer Sentiment index rose from 67.4 to 70.4. Economists had anticipated a fall to 67.1.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler tumbled by 12.83% to buck the trend. Continental and BMW rose by 3.43% and by 2.51% respectively, however, with Volkswagen rallying by 9.83%.

It was a relatively bullish week for the banking sector. Deutsche Bank and Commerzbank ended the week up by 1.77% and by 2.04% respectively.

From the CAC, it was a mixed week for the banks. Credit Agricole slipped by 0.08%, while Soc Gen and BNP Paribas ended the week with gains of 2.54% and by 0.96% respectively.

The French auto sector had a bullish week, however. Stellantis NV and Renault rose by 4.45% and by 3.73% respectively.

Air France-KLM and Airbus also found strong support, ending the week up by 5.76% and by 7.13% respectively.

On the VIX Index

It was back into the red for the VIX in the week ending 10^th December. The decline marked just a 2^nd fall in 5-weeks.

Reversing a 7.16% rise from the previous week, the VIX tumbled by 39.06% to end the week at 18.69.

4-days in the red from 5 sessions, which included a 19.46% slump on Tuesday delivered the downside.

For the week, the Dow rallied by 4.02%, with the NASDAQ and the S&P500 ending the week with gains of 3.61% and 3.82% respectively.

The Week Ahead

It’s another busy week ahead on the economic calendar.

Prelim private sector PMIs for December on Thursday and business sentiment figures on Friday will be in focus.

Finalized Eurozone inflation figures for November will also draw interest on Friday.

The main event, however, will be the ECB monetary policy decision and press conference on Thursday. Tapering aside, will ECB President Lagarde continue to see the spike in inflation as transitory?

From the U.S

it’s also a big week ahead for the global financial markets.

Wholesale inflation and retail sales will be in focus in the 1^st half of the week. Following the FED’s shift in stance on inflation, expect both data sets to be key.

On Thursday, jobless claims, Philly FED Manufacturing PMI, and prelim December private sector PMIs will draw attention. Expect the services PMI and jobless claims to have a greater impact, however.

While the stats will influence, the FOMC monetary policy decision, economic projections, and press conference will be the key driver.

The markets will be looking for a shift in forecasts on interest rates and any adverse impact of inflation on the economic outlook.

From Elsewhere

Mid-week, economic data from China will also draw interest. Fixed asset investment, industrial production, retail sales, and unemployment figures are due out. Expect the industrial production figures to be the key driver.

Away from the Economic Calendar

News updates on the new Omicron strain will also need monitoring alongside central bank chatter.