European Equities: A Week in Review – 15/11/19

The Majors

It was a positive yet unspectacular week for the European majors, with the CAC40 up by 0.84% to lead the way. The DAX30 and Eurostoxx600 saw more modest gains of 0.10% and 0.15% respectively.

For the DAX30, a 0.47% gain on Friday reversed losses from earlier in the week.

Economic data was in focus in the week, as was chatter from the U.S and China on trade.

The majors struggled as mixed news out of Beijing and Washington drove the majors throughout the week.

The Stats

It was another busy week on the Eurozone economic calendar.

It was a quiet start to the week, however. Economic data included November ZEW economic sentiment figures out of Germany and the Eurozone and Eurozone industrial production figures.

A marked improvement in Germany and the Eurozone’s economic sentiment figures provided support on Tuesday. Germany’s ZEW Economic Sentiment Index jumped from -22.80 to -2.10 in November.

The Eurozone’s Economic Sentiment Index also rebounded, rising from -23.50 to -1.00.

On Wednesday, industrial production rose by 0.1% in September, coming in ahead of a forecasted 0.3% decline.

The stats had a muted impact on the day, however, with the markets responding to Trump’s speech at the Economic Club on Tuesday, which was market negative.

On Thursday, GDP numbers out of Germany came in better than expected for the 3^rd quarter. While Germany avoided a contraction in the quarter, a downward revision to the 2^nd quarter GDP weighed on the day.

The better than expected German GDP numbers supported an upward revision to the Eurozone’s year-on-year GDP figures.

At the end of the week, the Eurozone’s trade surplus widened from €14.7bn to €18.7bn in September, which provided support to the majors.

Finalized inflation figures out of the Eurozone and member stats had a muted impact on the majors in the week.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen bucked the trend in the week, rising by 0.54%, with the upside coming off the back of a 1.6% rally on Friday. It was a bearish week for the rest of the sector, however. Daimler led the way down, sliding by 5.75%, with Continental down by 4.83%. BMW saw a more modest loss of 0.65% in the week.

It was a bearish week for the banking sector, however. Deutsche Bank fell by 4.49%, with Commerzbank sliding by 6.45%.

From the CAC, it was a mixed week for the banks. Credit Agricole rallied by 2.61%, with Soc Gen rising by 0.30%. BNP Paribas bucked the trend, with a 0.16% loss in the week.

French autos took a hit in the week. Peugeot fell by 1.37%, while Renault slid by 4.91%.

On the VIX Index

The VIX Index ended the week down by 0.17% in the week ending 15^th November. Following on from a 1.87% decline from the previous week, the VIX ended the week at 12.1.

Following 3 days in the green earlier in the week, a 7.7% slide on Friday left the VIX in the red for the week.

While economic data provided direction, sentiment towards trade ultimately pressured the VIX as the U.S majors hit new record highs.

In the early part of the week, sentiment towards the prospects of a phase 1 agreement had deteriorated before positive updates on Friday.

The U.S administration announced that the U.S and China were close to reaching a phase 1 trade agreement. It was enough for the bulls and led to the pullback in the VIX.

The Week Ahead

It’s a relatively busy week on the Eurozone economic calendar. The markets will need to wait until Friday, however, for key stats.

Prelim November private sector PMI numbers are due out of France, Germany, and the Eurozone on Friday.

Germany’s manufacturing PMI and the Eurozone’s composite PMI will continue to garner the greatest degree of interest.

Service sector activity will need to hold steady, however, for the majors to avoid a sell-off. The Eurozone continues to rely on service sector activity to offset the impact of the ongoing trade war on the manufacturing sector.

Germany’s 2^nd estimate GDP numbers for the 3^rd quarter will also provide direction on Friday. 2^nd estimate figures will need to be in line with 1^st estimate figures to support the majors.

Outside of the stats, expect the ECB’s Financial Stability Review, due out on Monday and the ECB’s monetary policy statement on Thursday to also influence.

From the U.S, the FOMC monetary policy meeting minutes will also provide direction in the 2^nd half of the week.

While the stats and monetary policy will provide direction, updates from Beijing and Washington on trade talks will have the greatest influence.

Expectations are for the U.S and China to reach a phase 1 agreement. The majors will be particularly sensitive to any chatter in the week.