European Equities: A Week in Review – 25/04/20

The Majors

It was a bearish week for the majors in the week ending 24^th April, with the DAX30 falling by 2.73% to lead the way.

The CAC40 and EuroStoxx600 weren’t far behind with losses of 2.35% and 1.16% respectively.

A Tuesday sell-off in response to WTI futures sliding into the red did the damage. A pullback on Friday added to the downside, however.

While Tuesday’s slide was crude oil-related, Friday’s pullback was in response to EU ministers failing to deliver a comprehensive COVID-19 aid package.

Thursday’s overnight meetings ended with no further funding, raising more questions over the viability of the EU project.

Economic data limited any upside in the majors mid-week, with record low service sector PMI figures for April pinning the majors back.

The Stats

It was a busy week on the Eurozone economic calendar.

Key stats included April’s prelim private sector PMI numbers for France, Germany, and the Eurozone. Out of Germany, consumer and business sentiment figures were also in focus, along with economic sentiment numbers.

The Eurozone’s economic sentiment and consumer confidence figures also garnered some interest.

The main area of focus, however, was on the April PMI numbers that certainly delivered some alarming results.

Service sector PMIs fell to record lows, with the Eurozone’s Composite also falling to a record low in April.

In spite of the sharp decline, the markets had anticipated the dire numbers for April, which had a limited impact on the majors.

On Friday, Germany’s Ifo Business Climate Index also fell to a record low, with the GfK Consumer Climate Indicator also sliding to a record low. Unsurprisingly, the Eurozone’s consumer confidence also slumped, though managed to avoid a new record low.

The markets brushed aside February trade figures for the Eurozone and wholesale inflation figures from Germany.

The Market Movers

From the DAX, it was a bearish week for the auto sector. BMW and Volkswagen slid by 6.57% and 5.00% respectively to lead the way down. Continental and Daimler weren’t far behind, however, with losses of 4.42% and 4.48% respectively.

It was also a bearish week for the banking sector, with a Friday sell-off contributing to the downside. Commerzbank fell by 3.27%, with Deutsche Bank tumbling by 8.33%.

Lufthansa slumped by 13.41%, with concerns over liquidity weighing heavily at the end of the week.

From the CAC, it was a mixed week for the banks. BNP Paribas and Credit Agricole rose by 3.26% and by 0.15% respectively, while Soc Gen fell by 3.01%.

The French auto sector also had a mixed week following the previous week’s tumble. Renault fell by 2.32%, while Peugeot ending the week up by 5.90%.

Air France-KLM slid by 6.08% following the previous week’s 10.02% tumble, with Airbus sliding by 7.85%.

On the VIX Index

It was a 5^th consecutive week in the red for the VIX, which fell by 5.82% in the week ending 24^th April. Following on from an 8.45% decline from the previous week, the VIX ended the week at 35.9.

The losses came in spite of the U.S equity markets ending the week in the red.

Market fear has abated as the U.S Administration continues to deliver more stimulus and talks of easing lockdown measures. A planned easing in lockdown measures comes as the number of new coronavirus cases continued a downward trend.

Hopes of a v-shaped economic rebound, in spite of the IMF’s views, lingered while unemployment continued to surge and private sector activity waned.

An unprecedented slump in crude oil prices ultimately left the U.S majors in the red for the week.

The S&P500 ended the week down by 1.32%, with the NASDAQ and the Dow falling by 1.93% and 0.18% respectively.

The Week Ahead

It’s another busy week ahead on the Eurozone economic calendar. The markets will need to wait until Thursday for key stats, however.

On Thursday, 1^st estimate GDP figures for France, Spain, and the Eurozone will be in focus. April unemployment figures from Germany will also be of interest.

French and German retail sales figures for March, the Eurozone’s unemployment rate for March, and prelim inflation figures for April will likely have a muted impact on the majors.

The main event of the week, however, is the ECB monetary policy decision on Thursday and the all-important press conference.

Following the failing of EU ministers to deliver a longer-term aid package last week, expect Lagarde to be vocal… It remains to be seen whether the ECB will make the promise of more support…

From elsewhere, private sector PMI numbers from China and U.S stats will also influence. The FED is also in action on Wednesday…

Away from the economic calendar, further talk of easing lockdown measures and COVID-19 numbers will also need monitoring.

It is a shortened week, with France, Germany, Italy, and Spain on holiday on Friday.