European Equities: A Week in Review – 11/06/21

The Majors

It was a mixed week for the majors in the week ending 11^th June.

The DAX30 ended the week flat, while the CAC40 and the EuroStoxx600 ended the week up by 1.30% and by 1.09% respectively.

Economic data from Germany pegged back the DAX30 in the week. The ECB monetary policy decision and press conference delivered support, however. Upward revisions to growth forecasts and the promise of continued policy support were key.

Adding to the upside in the week was the continued optimism towards the economic outlook, as member states reopened.

From the G7, talk of a more united front was also a positive for the majors at the end of the week.

The Stats

It was a busy 1^st half of the week on the economic data front.

The German economy was in focus.

In April, German factory orders (-0.20%) and industrial production (-1.00%) unexpectedly fell, following solid gains in March.

A modest increase in Germany’s trade surplus also disappointed, falling short of forecasts.

Economic sentiment figures from Germany and the Eurozone were also skewed to the negative. Sentiment towards the German and the Eurozone economies weakened marginally in June.

The numbers were not enough to spook the markets ahead of Thursday’s ECB policy decision and press conference.

Providing support in the early part of the week were finalized 1^st quarter GDP numbers for the Eurozone.

Quarter-on-quarter, the Eurozone economy contracted by a modest 0.3%, revised up from a prelim 0.6% contraction.

In the 2^nd half of the week, the focus was on the ECB and the all-important press conference.

Upward revisions to growth and inflation for this year raised the prospects of a possible nearer-term tapering. The lack of chatter on tapering, however, limited the damage. The ECB’s inflation forecasts also pointed to easing inflationary pressures in 2022 and 2023, which also a positive for the majors.

From the U.S

JOLT’s job openings and trade data were in focus early in the week.

The stats were skewed to the positive. In April openings jumped from 8.288m to 9.286m, with April’s trade deficit narrowing from $75.0bn to $68.9bn.

While the stats were market positive, there was limited impact on the broader markets.

The focus was on the weekly jobless claims and inflation figures due out on Thursday.

Also skewed to the positive, the annual core rate of inflation accelerated from 3.0% to 3.8%.

Core consumer prices and consumer prices continued to rise in the month of May and by more than had been expected.

Initial jobless claim figures were also positive but perhaps not impressive enough to force the FED into action. In the week ending 4^th June, initial jobless claims fell from a revised 405k to 376k. Economists had forecast a decline to 370k.

At the end of the week, prelim consumer sentiment figures wrapped things up, with sentiment improving in June.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen slid by 2.59% to buck the trend. BMW and Daimler ended the week up by 0.31% and by 0.25% respectively. Continental led the way, however, rising by a 1.65%.

It was a bearish week for the banking sector. Deutsche Bank and Commerzbank slid by 5.88% and by 3.98% respectively.

From the CAC, it was a mixed week for the banks. Credit Agricole rose by 0.49%, while BNP Paribas and Soc Gen saw losses of 1.66% and 0.72% respectively.

It was also a mixed week for the French auto sector. Stellantis NV fell by 0.23%, while Renault rallied by 7.46%.

Air France-KLM and Airbus ended the week up by 1.29% and by 2.15% respectively.

On the VIX Index

It was a 3^rd consecutive week in the red for the VIX in the week ending 11^th June. Following a 2.03% decline from the week prior, the VIX fell by 4.69% to end the week at 15.65.

2-days in the red from 5 sessions, which included an 10.01% fall on Thursday delivered the downside in the week.

For the week, the Dow fell by 0.80%, while the NASDAQ and the S&P500 ended the week up by 1.85% and by 0.41% respectively.

The Week Ahead

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

Eurozone industrial production, trade, and wage growth figures are due out Monday through Wednesday.

With little else for the markets to consider, we can expect the numbers to influence.

Finalized inflation figures for May are also due out for France, Germany, Italy, and the Eurozone.

Barring marked revisions to prelim figures, however, the numbers should have limited impact on the majors.

From the U.S

Early in the week, Wholesale inflation and retail sales figures will be in focus.

While inflation figures remain a key area of interest, retail sales will likely be the main focal point.

On Thursday, Philly FED Manufacturing and weekly jobless claim figures will also influence.

Other stats include industrial production, housing sector data, and manufacturing numbers out of NY State. We don’t expect these to have too much influence in the week, however.

On the monetary policy front, it will be the FED’s June monetary policy decision that will be the main event.

The markets are expecting discussions on a tapering to the asset purchasing program to begin. Will there be talk of a shift in sentiment towards interest rates? The projections will be key.