European Equities: A Week in Review – 11/03/22

The Majors

It was a bullish week for the European majors in the week ending 11^th March. The upside in the week was modest, however, with the major European bourses still deep in the red for the current month.

Once more, economic data took a back seat, with the markets at the mercy of news updates on Russia’s invasion of Ukraine.

Hopes of a resolution through diplomatic channels provided support.

The EuroStoxx600 rose by 2.23%, with the CAC40 and the DAX ending the week up by 3.28% and by 4.07%, respectively.

The Stats

The German economy was in focus early in the week. Impressive numbers provided little support, however, with the January numbers not capturing the impact of sanctions on the German economy.

In January, factory orders rose by 1.8%, with industrial production up 2.7%. Consumer spending was also on the rise, despite the continued increase in consumer prices. Retail sales jumped by 2.7% in January.

Other stats, including Eurozone GDP and member state inflation figures, drew even less attention, with the ECB in action.

In line with market expectations, the ECB left interest rates unchanged on Thursday. The ECB did announce that it would wind down asset purchases faster than planned. The more hawkish stance came despite ECB President Lagarde conceding that the Russian invasion of Ukraine will have a material impact on economic activity and inflation.

From the U.S

Inflation and jobless claims were the key stats in the week.

In the week ending 3^rd March, initial jobless claims increased from 216k to 227k. More significantly, the annual rate of inflation accelerated from 7.5% to 7.9%. The core annual rate of inflation picked up from 6.0% to 6.4%, casting yet more FED monetary policy uncertainty on the markets.

From Elsewhere

Trade and inflation data from China also had a limited impact on the European majors, despite upbeat numbers.

China’s USD trade surplus widened from $94.46bn to $115.95bn in February. The annual rate of inflation held steady at 0.9%, which was also market positive.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler rose by 0.55% and by 1.02%, while BMW and Volkswagen ended the week down by 0.93% and by 0.55%, respectively.

It was a better week for the banking sector. Deutsche Bank and Commerzbank rallied by 4.84% and by 4.87%, respectively.

From the CAC, it was a mixed week for the banks. Credit Agricole slipped by 0.10%, while BNP Paribas and Soc Gen saw gains of 3.90% and 6.68%, respectively.

Things were bearish for the French auto sector. Stellantis NV and Renault fell by 2.36% and by 3.50% respectively.

Air France-KLM and Airbus rose by 4.99% and by 6.65%, respectively.

On the VIX Index

It was back into the red for the VIX in the week ending 11^th March.

Partially reversing a 15.91% rise from the previous week, the VIX fell by 3.85% to end the week at 30.75.

3-days in the red from 5 sessions, which included a 7.63% fall on Wednesday delivered the downside.

For the week, the NASDAQ slid by 3.53%, with the Dow and the S&P500 falling by 1.99% and 2.88%, respectively.

The Week Ahead

It’s a quiet week ahead on the Eurozone economic calendar. The German and Eurozone ZEW Economic Sentiment figures for March will be in focus on Tuesday. On Friday, Eurozone trade and wage growth figures will also draw interest.

We don’t expect the numbers to have a material impact on the European majors, however. News updates on Russia and Ukraine will remain pivotal in the week ahead.

From the U.S, wholesale inflation and retail sales figures will influence ahead of the FOMC monetary policy decision on Wednesday. FED Chair Powell had talked of a smaller rate hike this month and then more aggressive hikes in the months ahead. Expect the projections and press conference to therefore have the greatest impact.

On Thursday jobless claims and Philly FED manufacturing numbers are also due out but should have a muted impact on the European markets that will be responding to the FED’s overnight projections.

From China, fixed asset investment, industrial production, and retail sales figures will need considering on Tuesday.