European Equities: A Week in Review – 23/07/21It was a bullish week for the European majors, the CAC40 led the way as investors jumped in after a Monday sell-off. The ECB contributed to the upside late in the week…
It was a choppy week for the majors in the week ending 23rd July.
The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.
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Concerns over the impact of the Delta strain on the economic recovery had sent the majors into the deep red on Monday.
Dip-buying, optimism towards corporate earnings, and ECB assurances supported a recovery, however.
Economic data in the week delivered mixed results, however, limiting the upside for the majors later in the week.
Key was a pickup in private sector activity in Germany…
Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.
It was a mixed set of numbers, however.
Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.
More significant, however, were the prelim PMI numbers for July.
The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.
Economists had forecast PMIs of 57.9 and 58.7 respectively.
From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.
Economists had forecast PMIs of 63.7 and 59.1 respectively.
For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.
Economists had forecast PMIs of 62.5 and 59.6 respectively.
According to the prelim Markit Survey,
- The composite PMI rose to a 252-month high in July, according to prelim figures.
- Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
- Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
- Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
- Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.
On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately supporting the European boerses on the day.
From the U.S
Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.
At the end of the week, prelim private sector PMI numbers for July were also in focus.
The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.
As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.
The Market Movers
From the DAX, it was a bullish week for the auto sector. Daimler rallied by 4.70% to lead the way, with Continental up 1.78%. BMW and Volkswagen saw more modest gains of 0.46% and 0.48% respectively.
It was a mixed week for the banking sector, however. Deutsche Bank rallied by 4.35%, while Commerzbank fell by 0.55%.
From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.38% and by 1.33% respectively, with Credit Agricole gaining 1.92%.
The French auto sector also found support with Stellantis NV and Renault seeing modest gains of 0.55% and 0.81% respectively.
Air France-KLM and Airbus ended the week up by 0.41% and by 0.78% respectively.
On the VIX Index
It was a back into the red for the VIX, which saw red for the 3rd week in 5 weeks.
In the week ending 23rd July, the VIX fell by 6.78%. Partially reversing a 14.03% gain from the previous week, the VIX ended the week at 17.2.
4-days in the red from 5 sessions, which included a 12.31% slide on Tuesday and a 9.22% decline on Wednesday delivered the downside. The VIX had jumped by 21.95% at the start of the week.
For the week, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.08% and by 1.96% respectively.
The Week Ahead
It’s a relatively busy week ahead on the economic calendar.
Early in the week, the German economy will be under scrutiny.
Business and consumer sentiment figures will be in focus.
Expect plenty of interest in the numbers that are due out on Monday and Wednesday.
On Thursday, unemployment numbers from Germany will also draw attention ahead of prelim GDP numbers on Friday.
GDP figures for France, Germany, and the Eurozone will be in focus at the end of the week.
Other stats in the week include member state and Eurozone inflation figures. Following Lagarde’s guidance on inflation, expect any spike in inflation to influence.
From the U.S, it’s also a busy week ahead.
On Tuesday, core durable goods and consumer confidence will be in focus.
The focus will then shift to the weekly jobless claims and 2nd quarter GDP numbers on Thursday.
Personal spending and consumer sentiment numbers wrap things up on Friday.
Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.