European Equities: A Week in Review – 15/04/22

The Majors

It was a mixed week for the European majors in the week ending April-15, 2022.

The CAC40 rose by 0.63%, while the DAX and the EuroStoxx600 saw losses of 0.84% and 0.25%, respectively.

A marked shift in central bank monetary policy and forward guidance, coupled with intensifying supply chain disruption weighed on riskier assets.

With U.S inflation hitting a 4 decade high and the war in Ukraine showing no signs of ending, fears of a continued rise in commodities, factory gate prices, and consumer prices were market negative.

An extended war in Ukraine would force central banks to take more aggressive measures to curb inflation, which could adversely affect the global economy.

The Stats

It was a quieter week, with the markets focused on economic sentiment and ECB monetary policy.

Economic sentiment figures for Germany and the Eurozone weakened further. In April, Germany’s ZEW Economic Sentiment Index slipped from -39.3 to -41.0, with the Eurozone’s falling from -38.7 to -43.0.

While inflation expectations softened, limiting the damage, fears of stagflation and the war in Ukraine weighed on sentiment.

Other stats in the week included finalized inflation figures for member states that had a muted impact on the EUR and European bourses.

On the monetary policy front, the ECB left the deposit and cash rates unchanged on Thursday. For the European majors, the more cautious stance was market positive.

Unlike other central banks, the ECB left interest rates unchanged and talked of downside risks to the economy stemming from the war in Ukraine.

From the U.S

At the start of the week, inflation was back in focus, with the U.S annual rate of inflation accelerating from 7.9% to 8.5%. In March, the core annual rate of inflation picked up from 6.4% to 6.5%.

On Thursday, the market focus shifted to retail sales, jobless claims, and consumer sentiment.

In March, retail sales increased by 0.5%, with core retail sales rising by 1.10%. Economists had forecast increases of 0.6% and 1.0%, respectively.

Jobless claims held below the 200k level. In the week ending April-08, jobless claims increased from 167k to 185k.

While of less influence, consumer sentiment also drew interest amidst the shift in FED policy forced by the surge in consumer prices.

In April, the Michigan Consumer Sentiment Index jumped from 59.4 to 65.7.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Volkswagen and Continental slid by 2.65% and 1.61%, respectively, with BMW falling by 0.99%. Daimler ended the week with a modest 0.16% gain.

It was a mixed week for the banking sector. Deutsche Bank tumbled by 7.33%, with Commerzbank falling by 6.91%.

From the CAC, it was a bullish week for the banks. Soc Gen rallied by 4.57%, with Credit Agricole and BNP Paribas rising by 0.91% and 3.47%, respectively.

Things were also bullish for the French auto sector. Stellantis NV and Renault ended the week up 1.28% and 1.74%, respectively.

Air France-KLM and Airbus saw gains of 3.63% and 2.63%, respectively.

On the VIX Index

It was a second consecutive week in the green for the VIX in the week ending April-15.

Following a 7.79% gain from the previous week, the VIX rose by 7.28% to end the week at 22.70.

2-days in the green from 4 sessions, which included a 15.2% jump on Monday, delivered the upside.

In the week, the Dow fell by 0.78%, with the NASDAQ and the S&P500 sliding by 2.63% and 2.13%, respectively.

The Week Ahead

It is another busy week ahead on the Eurozone economic calendar.

Mid-week, Eurozone trade, and industrial production figures will draw interest ahead of finalized inflation figures on Thursday.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will be the key stats of the week.

From the U.S, jobless claims and private sector PMIs will also influence.

Economic data from China will set the tone on Monday, with GDP and industrial production figures in focus.

While the stats will provide direction, news updates on the war in Ukraine will remain the key driver along with central bank chatter.