European Equities: A Week in Review – 12/11/21

The Majors

It was a relatively bullish week for the majors in the week ending 12^th November.

The DAX30 rose by 0.25%, with the CAC40 and the EuroStoxx600 ending the week with gains of 0.72% and 0.70% respectively. While the upside was modest, new record highs were reached in a choppy week, fueled by inflation.

Corporate earnings and a lighter Eurozone economic calendar limited the damage as inflation numbers from China and the U.S tested support.

In October, China’s annual rate of inflation accelerated from 0.7% to 1.5%. Month-on-month, consumer prices increased by 0.7% following a 0.1% rise in September. Wholesale inflation accelerated. China’s annual wholesale rate of inflation picked up from 10.7% to 13.5%.

While inflation numbers were key in the week, trade data from China had set the tone at the start of the week.

In October, China’s USD trade surplus widened from US$66.76bn to US$84.54bn. Economists had forecast a narrowing to US$65.55bn.

• Year-on-year, exports were up 27.7% versus a forecasted 24.5%. In September, exports had risen by 28.1%.
• Imports increased by 20.6%, versus a forecasted 25.0%. Imports had risen by 17.6% in September.

The Stats

Early in the week, German trade data was in focus alongside ZEW Economic Sentiment figures for Germany and the Eurozone.

While there was a modest increase in Germany’s trade surplus, sentiment towards the German and Eurozone economies impressed.

Germany’s ZEW Economic Sentiment Index jumped from 22.3 to 31.7, with the Eurozone’s rising from 21.0 to 25.9.

At the end of the week, industrial production figures for the Eurozone failed to impress, however.

In September, production fell by a further 0.2% after having declined by 1.7% in August.

Other stats in the week included finalized October inflation figures for France, Germany, and Spain. The numbers failed to move the dial, however, ahead of the euro area numbers next week.

From the ECB, the Economic Bulletin was also in focus, though there was little change in the narrative.

From the U.S

Through the 1^st half of the week, inflation was in focus, driving Dollar demand and questioning the FED’s transitory view.

In October, the annual rate of core wholesale inflation held steady at 6.8%, with the PPI up 0.4% in the month.

The annual rate of wholesale inflation also held steady at 8.6%

Of greater influence were October consumer price inflation figures, however.

In October, the annual core rate of inflation accelerated from 4.0% to 4.6%.

With the markets focused on inflation, the weekly jobless claims garnered little attention on Wednesday. In the week ending 5^th October claims slipped from 271k to 267k.

At the end of the week, consumer sentiment figures disappointed.

According to prelim figures for November, the Michigan Consumer Sentiment Index fell from 71.7 to 66.8. Economists had forecast for an increase to 72.4.

The Market Movers

From the DAX, it was another mixed week for the auto sector. Volkswagen fell by 2.62% to buck the trend once more. Continental rallied by 3.42%, however, to lead the way, with BMW rising by 1.42%. Daimler ended the week up by a modest 0.26%.

It was also a mixed week for the banking sector. Deutsche Bank slipped by 0.09%, while Commerzbank rallied by 3.42%.

From the CAC, it was a bearish week for the banks. Credit Agricole slid by 3.92%, with Soc Gen falling by 2.43%. BNP Paribas ended the week down by 0.40%.

It was a bullish week for the French auto sector, however. Stellantis NV rose by 1.37%, with Renault rallying by 5.62%.

Air France-KLM slid by 9.39%, with Airbus ending the week down by 1.55%.

On the VIX Index

It was back into the red for the VIX in the week ending 12^th November, marking a 4^th weekly decline in 6-weeks.

Reversing a 1.35% rise from the previous week, the VIX fell by 1.15% to end the week at 16.29.

2-days in the red from 5 sessions, which included a 7.76% slide on Friday delivered the downside.

For the week, the NASDAQ fell by 0.69%, with the Dow and the S&P500 ending the week down by 0.63% and by 0.31% respectively.

The Week Ahead

It’s a busier week ahead on the economic calendar.

Early in the week, trade data and 3^rd quarter GDP numbers for the Eurozone will be in focus. Expect any revisions to the GDP numbers to be key.

Mid-week, finalized inflation figures for the Eurozone will also draw interest, with any upward revisions likely to test support for the majors.

From the U.S, retail sales and industrial production figures will provide direction on Tuesday. With inflationary pressures continuing to build, weak retail sales figures may raise concerns over the economic outlook and FED policy.

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

From elsewhere, industrial production figures from China will set the tone at the start of the week. The markets will be looking for a pickup in production to end the recent downward trend.

Away from the economic calendar, commodity prices will remain an area of focus alongside central bank chatter.