European Equities: A Week in Review – 18/03/22

The Majors

It was another bullish week for the European majors in the week ending 18^th March.

The EuroStoxx600 rose by 5,26%, with the CAC40 and the DAX ending the week up by 5.75% and 5.76%, respectively.

Despite the ongoing Russian invasion of Ukraine, talks of a ceasefire delivered mid-week support. The hope of fresh stimulus from China to support the Chinese economy was also market positive. A retreat in crude oil prices in the week added further support.

Economic data from the Eurozone took a back seat, despite a slump in economic sentiment towards Germany and the Eurozone.

FED monetary policy also failed to spook the markets, with the FED lifting rates by just 25 basis points on Wednesday.

The Stats

ZEW Economic sentiment figures for Germany and the Eurozone disappointed in the week. The markets were expecting weak numbers, however, as analysts assess the impact of the Russian invasion of Ukraine on the economic outlook.

Late in the week, Eurozone trade data and wage growth had a muted impact on the EUR. The impact was muted despite wages growing at a softer pace in Q4 and the Eurozone’s trade deficit widening from €4.6bn to €27.2bn in January.

From the U.S

In the first half of the week, wholesale inflation and retail sales were the key stats. The numbers were mixed.

The core producer price index increased by 0.2% in February, which was softer than a 1.0% rise in January.  For riskier assets, the softer wholesale inflation figures were market positive.

More significantly, retail sales were also disappointing. Core retail sales rose by just 0.2%, with retail sales up 0.3% in February. Both had seen marked increases in the month prior.

Jobless claims and Philly FED Manufacturing numbers were more upbeat later in the week. In February, the Philly FED Manufacturing PMI rose from 16.0 to 27.4, with initial jobless claims falling from 229k to 214k in the week ending 10^th March.

While the stats drew plenty of interest, the FED monetary policy decision and projections were key in the week.

In line with market expectations, the FED raised interest rates by 25 basis points on Wednesday, with interest rate projections hawkish for the remainder of the year. Interest rates are projected to hit 2.8% by Q1 2023 versus a previously forecast of 0.9%.

From China

Fixed asset investment and industrial production figures were in focus. The numbers didn’t disappoint, though concerns over renewed lockdown measures to contain a new wave of COVID-19 infections overshadowed the upbeat numbers.

In February, fixed asset investments rose by 12.2%, year-on-year, up from 4.9% in January.

Industrial production increased by 7.5%, up from 4.3% in January.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Continental rallied by 7.79%, with Volkswagen gaining 7.11%. BMW and Daimler ended the week up 4.81% and 6.90%, respectively.

It was a better week for the banking sector. Deutsche Bank and Commerzbank surged by 14.94% and 12.18%, respectively.

From the CAC, it was a bullish week for the banks. Soc Gen led the way, rallying by 10.36%, with BNP Paribas and Credit Agricole seeing gains of 8.81% and 9.34%, respectively.

Things were also bullish for the French auto sector. Stellantis NV and Renault ended the week up 9.25% and 4.48%, respectively.

Air France-KLM and Airbus rose by 6.87% and 2.49%, respectively.

On the VIX Index

It was a second consecutive week in the red for the VIX in the week ending 18^th March, marking the third decline in 5 weeks.

Following a 3.85% fall from the previous week, the VIX slid by 22.37% to end the week at 23.87.

4-days in the red from 5 sessions, which included a 10.59% slide on Wednesday, delivered the downside.

For the week, the NASDAQ jumped 8.18%. The Dow and the S&P500 rallied by 5.50% and 6.16%, respectively.

The Week Ahead

It’s a relatively busy week ahead on the Eurozone economic calendar. Prelim March private sector PMIs for France, Germany, and the Eurozone will be the key stats of the week. The PMIs are due on Thursday, ahead of Germany’s IFO Business Climate Index figures on Friday.

From the U.S, economic data on Thursday will influence.

Key stats include jobless claims, core durable goods, and March’s prelim services PMI.

Away from the economic calendar, news updates on Russia’s invasion of Ukraine and any moves by China will also need monitoring.