European Equities: A Week in Review – 14/05/21

The Majors

It was a choppy week for the European majors in the week ending 14^th May. After hitting record highs early in the week, the EuroStoxx600 fell by 0.54%, with the CAC ending the week down by 0.01%.

The DAX30 managed to fully recover from heavy losses to end the week up by a modest 0.11%.

Economic data from the Eurozone took a back seat in the week. Concerns over the effect of a sharp pickup in inflationary pressures on FED monetary policy had weighed on riskier assets.

Market optimism towards a more rapid economic recovery across the Eurozone and corporate earnings delivered support, however.

News of member states across the Eurozone planning to reopen borders this coming summer fueled optimism in the week.

On the monetary policy front, assurances from the FED that there would be no shift in policy also delivered support at the end of the week.

The Stats

Early in the week, investor confidence and economic sentiment figures were in focus.

The stats were skewed to the positive, with both investor and economic sentiment figures aligned with market optimism.

In May, the Eurozone’s Sentix Investor Confidence Index surged from 13.1 to 21.0.

The more influential ZEW Economic Sentiment figures for Germany and the Eurozone also impressed.

Germany’s ZEW Economic Sentiment Indicator jumped from 70.7 to 84.4, with the Eurozone’s climbing from 66.3 to 84.0.

Mid-week, industrial production figures for the Eurozone and finalized inflation figures for France and Germany were also in focus.

In the month of April, German consumer prices increased by 0.7%, following a 0.7% rise in March. This was in line with prelim figures.

At the turn of the quarter, the annual rate of inflation picked up from 1.7% to 2.0% according to finalized figures. This was also in line with prelim figures.

French consumer prices increased by 0.1%, which was down from a prelim 0.2%. Consumer prices had risen by 0.6% in the month of March. The annual rate of inflation ticked up from 1.1% to 1.2% in April, however.

In March, Eurozone industrial production rose by 0.1%, month-on-month, following a 1.2% decline from April. Economists had forecast a 0.7% increase.

When compared with March 2020, industrial production was up by 10.9%, falling short of a forecasted 11.6 increase. In February, production had fallen by 1.8% year-on-year.

From the U.S

It was a quieter week on the data front.

Early in the week, April inflation figures sent riskier assets into the deep red.

The core annual rate of inflation accelerated from 1.6% to 3.0% in April. Fueling fears of a shift in FED monetary policy.

On Thursday, the weekly jobless claims figures were upbeat, however. In the week ending 7^h May, initial jobless claims fell from 507k to 473k. This was the lowest level since the start of the pandemic back in March 2020.

At the end of the week, retail sales, consumer confidence, and industrial production figures failed to influence.

In April, retail sales were flat following a 10.7% jump in March, with core retail sales falling by 0.8%, month-on-month. In March, core retail sales had risen by 9.0%.

Economists had forecast a 0.7% rise in core retail sales and a 1% increase in retail sales.

Prelim consumer sentiment figures also disappointed. In May, the consumer sentiment index fell from 88.3 to 82.8 versus a forecasted increase to 90.4.

While falling short of forecasts, industrial production did rise further, however. In April, production increased by 0.7% following a 2.4% rise in March.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Daimler rose by 1.13%, with Continental and Volkswagen gaining 0.49% and 0.43% respectively. BMW eked out a 0.08% gain for the week.

It was also a bullish week for the banking sector. Deutsche Bank rose by 2.07%, with Commerzbank rallying by 15.86%.

From the CAC, it was another bullish week for the banks. Soc Gen led the way once more, rallying by 4.78%, with BNP Paribas and Credit Agricole ending the week with gains of 4.13% and 3.57% respectively.

It was a mixed week for the French auto sector, however. Stellantis NV rose by 0.01%, while Renault ended the week down by 2.20%.

Air France-KLM slipped by 0.24%, while Airbus rose by 1.22%.

On the VIX Index

It was back into the green for the VIX in the week ending 14^th April. Marking just a 4^th weekly gain in 11-weeks, the VIX rose by 12.70%. Reversing a 10.32% fall from the previous week, the VIX ended the week at 18.81.

3-days in the green from 5 sessions, which included a 26.33% jump on Wednesday, delivered the upside in the week for the VIX.

For the week, the NASDQ slid by 2.34%, with the Dow and the S&P500 ending the week down by 1.14% and by 1.39% respectively.

The Week Ahead

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

On Tuesday, 2^nd estimate GDP numbers and March trade data for the Eurozone will draw interest.

Expect any revisions to the Eurozone’s GDP numbers to be key.

On Wednesday, finalized Eurozone inflation figures for April will be in focus ahead of a busy Friday.

At the end of the week, prelim private sector PMIs for France, Germany, and the Eurozone will be key drivers.

The markets will be looking for sustained momentum in the economic recovery. A pickup in service sector activity will be key to support the market optimism.

From the U.S, manufacturing sector figures from NY State and Philly will be in focus.

Key stats of the week, however, will be jobless claim figures on Thursday and prelim private sector PMIs on Friday.

Other stats in the week include industrial production, fixed asset investment and retail sales figures from China. From the stats due out on Monday, expect the industrial production figures to have the greatest impact on the majors.