European Equities: A Week in Review – 13/06/20

The Majors

It was a bearish week for the European majors in the week ending 12^th June. The DAX30 slid by 6.99%, with the CAC40 and EuroStoxx600 declining by 6.90% and by 5.66% respectively.

Following 3 consecutive weekly gains, the losses barely made a dent, however, though all three remain deep in the red for the current year.

Economic data took a back seat in the week as the markets digested economic forecasts from the World Bank, OPEC, and the FED.

Powell rounded off a string of grim forecasts that led to a marked pullback on Thursday.

With so much fiscal and monetary policy support, however, even the prospect of a more dire 2^nd quarter failed to deliver a meltdown.

One other curveball in the week was a pickup in new coronavirus cases. U.S states, which had recently reopened, reported a jump in new COVID-19 cases, raising the threat of a 2^nd wave.

The dire economic environment and outlook, the FED’s warnings together with the threat of a 2^nd wave were enough to leave the majors in the deep red…

The Stats

It was a relatively quiet week on the Eurozone economic calendar.

On the productivity front, key stats included April industrial production figures for Germany and the Eurozone.

With the lockdown in April, the dire numbers were not surprising, while the size of the slide was alarming…

German industrial production tumbled by 17.9%, month-on-month, with Eurozone industrial production down by 17.1%.

Trade data out of Germany was no better, with the trade surplus narrowing from €12.8bn to €3.2bn in April.

While finalized GDP numbers for the Eurozone were revised upwards, it was still a marked contraction in the quarter. Coupled with the negative April numbers and alarm bells from the World Bank, OPEC, and the FED, it was a bad mix for the bulls.

From the U.S, there was little comfort from the weekly jobless claims figures, with claims rising by another 1.542m.

Consumer sentiment and expectations did see a pickup in June, supported by the easing of lockdown measures in the U.S. Much will now depend on the COVID-19 numbers and whether labor market conditions improve enough for consumers to loosen the purse strings.

The Michigan Consumer Expectations Index rose from 65.9 to 73.1, with the Sentiment Index rising from 82.3 to 87.8.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Continental reversed last week’s 9.28% rally with an 11.42% slide to lead the way down. Daimler and Volkswagen fell by 7.22% and by 8.70% respectively, while BMW saw a more modest 4.54% decline.

It was marginally better but still bearish for the banking sector. Commerzbank slid by 6.03%, with Deutsche Bank falling by 3.14%.

Lufthansa partially reversed last week’s 14.73% breakout with a 2.51% loss.

From the CAC, it was a particularly bearish week for the banks. Soc Gen slid by 12.34% to partially reverse last week’s 27.36% gain. BNP Paribas and Credit Agricole weren’t far behind, with losses of 10.61% and 10.66% respectively.

It was an even less impressive week for the French auto sector. Peugeot and Renault slid by 12.70% and 15.16% respectively.

Air France-KLM barely made a dent in last week’s 37.1% breakout, with a 13.34% loss, with Airbus slumping by 17.31%. In the week prior, Airbus had surged by 42.82%.

It all could have been far worse had the markets not found support on Friday…

On the VIX Index

A run of 3 consecutive weeks in the red came to an end for the VIX, which rose by 47.19% in the week ending 12^th June. Reversing a 10.87% slide from the previous week, the VIX ended the week at 36.09.

Market fear returned as news hit the wires of a pickup in new COVID-19 cases in the U.S amidst the quite dire economic projections.

Economic data was on the lighter side in the week, providing little support for riskier assets following the previous week’s labor market numbers.

The S&P500 ended the week down by 4.78%, with the Dow and NASDAQ falling by 5.55% and by 2.30% respectively.

The Week Ahead

While it’s an even quieter week ahead on the Eurozone economic calendar, there are some key stats to consider.

On Tuesday, June’s ZEW Economic Sentiment figures for Germany and the Eurozone will garner interest.

Other stats, which include April trade data and wage growth from the Eurozone and inflation figures for May will likely be brushed aside.

From elsewhere, expect May industrial production numbers out of China, weekly jobless claims figures, and manufacturing PMIs from the U.S to also influence…

Outside of numbers, COVID-19 news and updates along with geopolitical risk will also be in focus in the week…