European Equities: A Week in Review – 13/11/20

The Majors

It was another bullish week for the European majors in the week ending 13^th November.

The CAC40 rallied by 8.45% to lead the way, with the DAX30 and EuroStoxx 600 gaining 4.78% and 5.31% respectively.

Impressive COVID-19 vaccine updates drove demand for riskier assets in the 1^st half of the week. Pfizer Inc. announced a more than 90% efficacy rate, which spurred a global equity market rally.

Also supporting riskier assets was a trade-friendly outcome to the Presidential Election.

The upside came in spite of market concerns over the near-term economic outlook.

A continued rise in new COVID-19 cases and containment measures pegged the majors back in the 2^nd half of the week.

Also pressuring the majors late in the week was a reality check on how quickly an effective vaccine can inoculate the region and beyond.

The Stats

In the 1^st half of the week, ZEW Economic Sentiment figures for Germany and the Eurozone disappointed.

In November, Germany’s ZEW Economic Sentiment Indicator slid from 56.1 to 39.0. The Eurozone’s indicator fell from 52.3 to 32.8. The deterioration was a reflection of investor sentiment towards the latest lockdown measures.

On Thursday, the ECB’s Economic Bulletin raised more red flags over the economic outlook. The doom and gloom bulletin ended a run of 3 consecutive days in the green for the European majors.

On Friday, 3^rd quarter GDP numbers for the Eurozone also failed to impress, with downward revisions pinning back the majors. Quarter-on-quarter, the economy grew by 12.6%, coming up short of the 1^st estimate of 12.7%.

Finalized inflation figures from Germany, France, and Spain, and Eurozone industrial production and trade data had a muted impact in the week.

On the monetary policy front, ECB President Lagarde assured the markets of more support next month. The comments off the back of the upbeat vaccine trial numbers from Pfizer Inc. and BioNTech SE.

From the U.S

In the 1^st half of the week, JOLTs job openings for September had a muted impact on the markets. The majors brushed aside disappointing numbers, as investors responded to the positive vaccine news.

On Thursday, inflation and jobless claims figures contributed to a Thursday pullback.

Inflationary pressures eased at the turn of the quarter, with the annual core rate of inflation softening from 1.7% to 1.6%.

Jobless claims figures came in better than forecasted but were not good enough to ease concerns over labor market conditions.

In the week ending 6^th November, initial jobless claims came in at 709k, down from the previous week’s 757k.

At the end of the week, prelim November consumer sentiment and October wholesale inflation figures were also in focus.

The Michigan Consumer Sentiment Indicator fell from 81.8 to 77.0. Concerns over the 2^nd wave of the COVID-19 pandemic and economic uncertainty weighed.

Wholesale inflation figures also disappointed, with the core Producer Price Index rising by just 0.10% in October. In September, the core producer price index had risen by 0.4%.

The U.S majors found strong support at the end of the week, in spite of the weak numbers, however.

The Market Movers

From the DAX, it was another particularly bullish week for the auto sector. Continental jumped by 14.38% to lead the way. BMW and Volkswagen were closed behind, rallying by 11.02% and by 12.35% respectively. Daimler saw a more modest 8.69% gain for the week.

It was also a bullish week for the banking sector. Commerzbank surged by 23.62%, with Deutsche Bank ending the week up by 5.61%.

From the CAC, it was a particularly bullish week for the banks. BNP Paribas surged by 20.13%, with Credit Agricole and Soc Gen rallying by 16.15% and by 19.50% respectively.

The French auto sector also found further support. Peugeot rallied by 11.11%, with Renault ending the week up by 27.79%.

Air France-KLM followed last week’s 9.43% gain with a 26.67% rise, with Airbus rallying by 22.23%.

On the VIX Index

It was a 2^nd consecutive week in the red and a 3^rd weekly drop from 7 for the VIX. In the week ending 13^th November, the VIX fell by 7.08%. Following on from a 34.61% slide from the previous week, the VIX ended the week at 23.10.

Positive data from Pfizer Inc. and BioNTech SE on their COVID-19 vaccine trials delivered the upside in the week. The gains came in spite of continued rising new COVID-19 cases in Europe and the U.S.

Going into the week Biden became the President-Elect, which was also market positive. At the end of the week, Trump’s chances of overturning the result diminished, with Biden taking Arizona, another positive outcome for the markets.

For the week, the NASDAQ fell by 0.55%, while the Dow and S&P500 saw gains of 4.08% and 2.16% respectively.

The Week Ahead

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

Finalized inflation figures for Italy and the Eurozone are due out in the 1^st half of the week. Barring a material revision from prelims, however, the stats are unlikely to move the dial.

At the end of the week, wholesale inflation figures from Germany and consumer confidence figures for the Eurozone will influence.

With the 2^nd wave of the COVID-19 pandemic hitting Europe, consumer confidence figures will garner plenty of interest.

From the U.S, it’s a busy week ahead. Key stats include retail sales and industrial production figures in the 1^st half of the week. In the 2^nd half, the focus will then shift to Philly FED Manufacturing and the weekly jobless claims figures.

Also of influence will be industrial production, retail sales, and unemployment numbers from China.

Away from the economic calendar, Brexit talks enter the final stretch ahead of the 19^th November EU Summit deadline.

COVID-19 news updates and U.S politics will also influence.