Advertisement
Advertisement

European Equities: A Week in Review – 18/04/20

By:
Bob Mason
Published: Apr 17, 2020, 23:32 UTC

It was a mixed week for the European majors, with the CAC40 unable to reverse losses in spite of a Friday breakout. It was all about COVID-19...

S&P 500

The Majors

It was a mixed week for the European majors, with a Friday rally needed to reverse losses from earlier in the week.

Economic data was on the lighter side once more, leaving the markets to place their attention elsewhere.

Updates on the number of new coronavirus cases across the EU and the U.S revealed a downward trend through much of the week. The numbers were aligned with governments suggesting that the peak of the pandemic had passed.

From the U.S, a planned easing in lockdown measures delivered strong support to the broader markets late in the week.

Through the 1st half of the week, however, the IMF delivered the markets a reality check, with some quite dire economic forecasts for 2020.

A pullback on Wednesday, came off the back of the IMF forecasting a 7.5% contraction in the Euro area economy in 2020. It wasn’t much better for the U.S, which was forecasted to see a 5.9% contraction.

For the week, the CAC40 fell by 0.17%, while the DAX30 and EuroStoxx600 rose by 0.58% and 0.50% respectively.

The Stats

It was a relatively quiet week on the Eurozone economic calendar.

Key stats in the week included finalized March inflation figures for France, Germany, Italy, and Spain. February industrial production figures for the Eurozone were also in focus.

The stats had a muted impact on the European majors, however.

From the U.S, it was a busier week on the economic calendar and there certainly wasn’t anything positive to support the majors.

In March, retail sales and core retail sales slid by 8.7% and by 4.5% respectively, with industrial production falling by 5.4%.

Manufacturing numbers for April were also quite dire. The NY Empire State Manufacturing Index fell from -21.5 to -78.2, with the Philly FED Index falling from -12.7 to -56.6.

Labor market figures also continued to paint a gloomy picture, with initial jobless claims jumping by 5.245m.

While housing sector figures for March were also disappointing, April and May numbers will have a greater impact.

From a market perspective, talk of easing lockdown measures suggests that April should be the economic bottom. The view allowed the markets to brush aside the stats in the week. Economic data through June will need to support a pickup in economic activity, however.

The Market Movers

From the DAX, it was a mixed week for the auto sector. BMW, Continental, and Volkswagen saw gains of 2.87%, 0.95%, and 0.77% respectively. Daimler bucked the trend with a 1.98% loss, however.

It was a bearish week for the banking sector, with a Friday rally not enough to reverse losses from earlier in the week. Commerzbank slid by 6.33%, with Deutsche Bank falling by 2.12%.

Lufthansa fell by 5.54%, with airline stocks under the hammer in the week.

From the CAC, it was a particularly bearish week for the banks, following last week’s rally. BNP Paribas tumbled by 10.35%, with Credit Agricole and Soc Gen sliding by 6.31% and 7.19% respectively.

The French auto sector saw even heavier losses, with Renault and Peugeot ending the week down by 11.65% and 12.75% respectively.

Air France-KLM didn’t do much better, falling by 10.02%, while Airbus saw a more modest 6.89% loss in the week.

On the VIX Index

It was yet another week in the red for the VIX, which fell by 8.45% in the week ending 17th April. Following on from a 10.96% fall from the previous week, the VIX ended the week at 38.2.

Market reaction to plans by the U.S to begin a phased reopening drove demand for riskier assets in the week.

For the VIX, it was 4 days in the red out of 5 that delivered the losses in the week.

An 8.16% bounce on Wednesday did limit the losses, however, as the markets reacted to the IMF’s economic forecasts for 2020…

While Wednesday was a reminder of the underlying risks to the current market rebound, the fear factor has almost vanished.

The S&P500 ended the week up by 3.04%, with the NASDAQ and the Dow gaining 6.09% and 2.21% respectively.

VIX 18/04/20 Weekly Chart

The Week Ahead

It’s a busy week ahead on the Eurozone economic calendar. Economic sentiment, business, and consumer confidence figures for Germany and the Eurozone will be in focus.

The market may be able to stomach weak numbers for April, which should limit any influence from the numbers.

In the 2nd half of the week, the focus will shift to April’s prelim private sector PMIs for France, Germany, and the Eurozone.

We’re expecting the April figures to reflect a pickup in the pace of contraction across the private sector. March numbers had yet to fully reflect the effects of the lockdown for France and Germany in particular.

From elsewhere, prelim private sector PMIs from the U.S will also garner some attention.

Key in the week, however, will be the details on the phased easing of lockdown measures across the U.S and the EU.

Coronavirus numbers through the weekend and the early part of the week will also need to continue to reflect the downward trend…

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

Did you find this article useful?

Advertisement