European Equities: A Week in Review – 26/11/21

The Majors

It was a bearish week for the majors in the week ending 26^th November.

The DAX30 slumped by 5.59%, with the CAC40 and the EuroStoxx600 ending the week with losses of 5.24% and 4.53% respectively.

Disappointing economic data from Germany had pegged back the DAX30 in particular ahead of a broad-based market sell-off on Friday.

Adding to the market angst ahead of Friday’s sell-off was FED Chair Powell’s reappointment, which led to bets of a more hawkish stance on monetary policy.

The Friday sell-off, however, came off the back of news of a new COVID-19 variant identified in South Africa. Considered a significantly more virulent strain, border closures and talks of tight measures to contain the spread sank the majors on Friday.

The Stats

Early in the week, consumer confidence and prelim November private sector PMIs were in focus.

Rising new COVID-19 cases weighed on consumer sentiment, with the Eurozone consumer confidence index falling from -4.8 to -6.8.

Private sector PMIs for November were positive, however.

A pickup in service sector activity across France and German led to a rise in the Eurozone’s services PMI from 54.6 to 56.6. French manufacturing sector activity also picked up, while Germany’s held steady, supporting an increase in the Eurozone Composite PMI from 54.2 to 55.8.

The rest of the numbers were skewed to the negative, however, with the German economy in the spotlight.

German business sentiment waned in November, with the Ifo Business Climate Index falling from 97.7 to 96.5.

It wasn’t much better for consumers. Consumer sentiment took a hit, with the GfK Consumer Climate Indicator for December falling from 1.0 to -1.6.

German GDP numbers also disappointed.

In the 3^rd quarter, the German economy expanded by 1.7% quarter-on-quarter, according to 2^nd estimate figures. This was down from a prelim 1.8% and a 2^nd quarter 2.0%.

From the U.S

Early in the week, prelim private sector PMIs were in focus, with the numbers skewed to the negative.

While the manufacturing PMI rose from 58.4 to 59.1, the all-important services PMI declined from 58.7 to 57.0. As a result, the Composite PMI fell from 58.7 to 57.0.

Ahead of the Thanksgiving holidays, a particularly busy set of numbers also drew plenty of interest.

Personal spending rose by 1.3%, with jobless claims falling from 270k to 199k in the week ending 19^th November.

Core durable goods orders were also positive, rising by 0.5% in October, with inflationary pressures picking up once more.

The FED’s preferred core PCE price index rose by 4.1%, year-on-year in October. In September, the index had risen by 3.7%.

GDP numbers for the 3^rd quarter fell short of estimates, however. In the 3^rd quarter, the economy expanded by 2.1%, falling short of a forecasted 2.2%. The economy had expanded by 6.7% in the previous quarter.

The Market Movers

From the DAX, it was a particularly bearish week for the auto sector. Volkswagen tumbled by 9.59% to lead the way down, with BMW and Continental sliding by 8.30% and by 8.09% respectively. Daimler wasn’t far behind, ending the week down by 7.88%.

It was a relatively bearish week for the banking sector, however. Deutsche Bank slipped by 0.83%, while Commerzbank fell by 5.83%.

From the CAC, it was also a bearish week for the banks. Soc Gen slid by 5.48%, with Credit Agricole and BNP Paribas ending the week with losses of 3.29% and by 4.21% respectively.

The French auto sector also saw deep red. Stellantis NV and Renault slumped by 10.00% and by 10.08% respectively.

Air France-KLM fell by 6.76%, with Airbus sliding by 9.18%.

On the VIX Index

It was a 2^nd consecutive week in the green for the VIX in the week ending 26^th November, marking a 4^th weekly gain in 8-weeks.

Following a 9.94% rise from the previous week, the VIX surged by 59.8% to end the week at 28.62.

3-days in the green from 4 sessions, which included a 54.04% surge on Friday delivered the upside.

For the week, the NASDAQ slid by 3.52%, with the Dow and the S&P500 ended the week down by 1.97% and by 2.20% respectively.

 

The Week Ahead

It’s another busy week ahead on the economic calendar.

Early in the week, French consumer spending and German unemployment figures will be in focus alongside prelim inflation figures for November.

While Germany’s unemployment figures will draw plenty of attention, member state and the Eurozone’s inflation figures will be key.

Mid-week, German retail sales and November manufacturing PMI numbers will be in focus. Barring marked revisions to prelims for France and Germany, expect Italy and the Eurozone’s PMIs to have the greatest impact.

At the end of the week, service sector and composite PMIs will also influence, with the Eurozone’s composite PMI the key stat.

Other stats include Eurozone retail sales and unemployment figures and French GDP numbers that should have a muted impact on the majors.

From the U.S, it’s also a busy week. Consumer confidence figures will be in focus early in the week ahead of ADP nonfarms on Wednesday.

On Thursday, the weekly jobless claims will also influence ahead of November’s ISM Non-Manufacturing PMI and nonfarm payrolls on Friday.

From elsewhere, private sector PMIs from China will draw interest, with the Caixin Manufacturing PMI on Wednesday the key stat.

Away from the economic calendar, however, COVID=19 news updates and government measures to contain the spread of the new strain will be key. Also of particular significance will be any news updates of the strain’s resistance against existing vaccines.

With lockdown measures being reintroduced, central bank chatter will need monitoring.