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Bob Mason
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The Majors

It was a bearish week for the majors in the week ending 18th June, with a Friday sell-off doing the damage.

The DAX30 and the EuroStoxx600 ended the down by 1.56% and by 1.16% respectively, with the CAC40 falling by 0.48%.

While economic data influenced in the week, a more hawkish than expected FED  weighed on the majors.

On Friday, hawkish FOMC member chatter added to the market angst.

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The Stats

Industrial production, trade data, and wage growth figures for the Eurozone were in focus.

It was a mixed set of numbers for the majors.

While industrial production rose by more than expected in April, the Eurozone’s trade surplus narrowed markedly, with wage growth also slowing significantly in the 1st quarter.

The stats had a relatively muted impact on the EUR, however, with the markets focus being on the FED in the week.

Late in the week, finalized inflation figures for the Eurozone and wholesale inflation figures from Germany delivered little comfort.

Inflationary pressures have continued to build and a marked acceleration in Germany wholesale inflation added more pressure on the majors on Friday.

In May, the Eurozone’s annual rate of inflation accelerated from 1.6% to 2.0%, which was in line with prelim numbers. Consumer prices increased by 0.3% in the month of May, which was also in line with prelim figures. In April, consumer prices had risen by 0.6%.

German wholesale inflation figures pointed to a further pickup in headline inflation in the months ahead.

In May, Germany’s annual wholesale rate of inflation accelerated from 5.2% to 7.2%.

From the U.S

Retail sales and wholesale inflation figures drew plenty of attention on Tuesday.

It was a mixed set of numbers, however.

While wholesale inflationary pressures picked up in May, retail sales hit reverse in May.

Industrial production and NY Empire State manufacturing numbers also delivered mixed results on the day.

While industrial production rose further in May, the NY Empire State Manufacturing Index fell from 24.3 to 17.4 in June.

In the 2nd half of the week, jobless claims and Philly FED Manufacturing PMI numbers were in focus.

In June, the Philly FED Manufacturing PMI fell from 31.5 to 30.7, versus a forecasted 31.0.

While the headline index declined, the employment sub-index was on the rise. The sub-index increased from 19.3 to 30.7.

Jobless claim figures disappointed, however.

In the week ending 11th June, initial jobless claims rose from 375k to 412k. Economists had forecast a decline to 359k.

While the stats did draw attention, the FOMC monetary policy decision, press conference, and economic projections were the key drivers in the week.

A more hawkish than expected outlook on the economy and interest rates sent the European majors into a spin late in the week.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Volkswagen slid by 6.25%, with BMW and Continental ending the week down by 4.02% and by 4.47% respectively. Daimler saw a relatively modest 3.05% loss in the week.

It was also a bearish week for the banking sector. Deutsche Bank and Commerzbank slid by 6.16% and by 5.53% respectively.

From the CAC, it was a bearish week for the banks. Credit Agricole and Soc Gen saw losses of 5.07% and 5.01% respectively, with BNP Paribas falling by 4.31%.

It was also a bearish week for the French auto sector. Stellantis NV and Renault ended the week down by 4.00% and by 3.95% respectively.

Air France-KLM saw a modest 2.57% loss, while Airbus ended the week up 0.39%.

On the VIX Index

It was a 1st week in the green from 4 for the VIX in the week ending 18th June. Reversing a 4.69% decline from the week prior, the VIX jumped by 32.27% to end the week at 20.70.

4-days in the green from 5 sessions, which included an 16.62% jump on Friday delivered the upside in the week.

For the week, the Dow slid by 3.45%, with the NASDAQ and the S&P500 ending the week down by 0.28% and by 1.91% respectively.

The Week Ahead

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

On Wednesday, prelim private sector PMIs for France, Germany, and the Eurozone will draw plenty of attention.

While manufacturing sector PMI numbers from Germany remain, key a further pickup in service sector activity across the Euro bloc is going to be needed to support the market optimism.

Through the latter part of the week, German business and consumer sentiment figures will also influence.

From the U.S, private sector PMIs on Wednesday will also be in focus on Wednesday. Expect the services PMI to be the key driver for riskier assets. On Thursday, the focus will shift to jobless claims and core durable goods orders ahead of personal spending and inflation numbers on Friday.

We could see riskier assets come under further pressure should there be a marked decline in jobless claims figures in the week.

On the monetary policy front, central bank chatter will now begin to have a greater influence following last week’s FOMC projections and press conference.

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