European Equities: A Week in Review – 27/06/20

The Majors

It was a bearish week for the European majors in the week ending 26^th June. The DAX30 and EuroStoxx600 fell by 1.96% and by 1.95% respectively, with the CAC40 seeing a 1.40% loss in the week.

Only partially reversing gains from the previous week, the majors remained in positive territory for the current month.

It was a mixed week for the bulls. Economic data provided the majors with much-needed support, while geopolitics and COVID-19 updates weighed in the week.

Looking at the COVID-19 numbers in the week, there was a marked increase in the number of new cases in the U.S and globally. Germany had also reportedly reintroduced lockdown measures in one district. At a difficult time for the global economy, Trump added to the market angst, with talk of tariffs on EU goods.

On the monetary policy front, the ECB expanded its support for the global financial markets, easing some of the pain. The ECB announced a new repo program, whereby it would offer collateralized EUR loans to central banks outside of the Eurozone.  This had reversed losses across the majors on Thursday.

On Friday, however, the focus was primarily on COVID-19 updates from the U.S, as a number of states hit pause on reopening.

The Stats

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

Key stats included June’s prelim private sector PMIs for France, Germany, and the Eurozone. June and July business and consumer sentiment figures from Germany were also in focus.

Economic data was skewed heavily to the positive, with the PMIs and sentiment supporting a quicker than expected economic recovery.

The Eurozone’s Composite PMI rose from 31.9 to 47.5, supported by a return to expansion across France’s private sector.

While business and consumer sentiment improved at the turn of the quarter, there is still a long way to go before recovering to pre-pandemic levels, however…

From the U.S

It was a mixed week on the day data front…

Durable goods and core durable goods orders rebounded in May, with private sector activity contracting at a lesser pace in June.

Jobless claims failed to impress, however, with initial jobless claims rising by 1.48m in the week ending 19^th June. Economists had forecast a 1.3m increase.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen rose by 1.97% to buck the trend in the week. Daimler slid by 4.22%, with Continental and BMW saw more modest losses of 0.49% and 1.08% respectively.

It was another bearish week for the banking sector. Commerzbank and Deutsche Bank fell by 2.52% and by 2.43% respectively.

Lufthansa rose by 1.29% in the week to partially reverse a 3.82% slide from the previous week.

From the DAX30, the story of the week was WIRECARD AG once more. Following a 73.96% slump last week, WIRECARD AG ended the week down by 94.15%.

From the CAC, it was another mixed week for the banks. BNP Paribas fell by 2.29% to buck the trend. Credit Agricole and Soc Gen saw relatively modest gains of 0.12% and 0.77% respectively.

It was also a mixed week for the French auto sector, with Peugeot rising by 3.75%, while Renault fell by 0.76%.

Air France-KLM followed the previous week’s 5.49% slide with a 12.23% tumble, with Airbus ending the week down by 10.14%.

On the VIX Index

It was another week in the red, with the VIX seeing red for 5 weeks out of 6. In the week ending 26^th June, the VIX fell by 1.11% to end the week at 34.73. In the previous week, the VIX had fallen by 2.69%.

Market sentiment towards COVID-19 and geopolitics weighed on the U.S equity markets in the week. Trump’s threat of rolling out tariffs on the EU, including the UK, came as U.S member states reported spikes in new COVID-19 cases.

By the end of the week, a number of U.S states even hit pause in reopening as new cases hit record highs.

On the economic data front, it was a mixed bag. While the private sector continued to recover, the weekly jobless claims figures suggested that the labor market recovery could be more drawn out.

The S&P500 ended the week down by 2.86%, with the Dow and NASDAQ falling by 3.31% and by 1.90% respectively.

The Week Ahead

It’s a busier week ahead on the Eurozone economic calendar. Key stats include private sector PMIs out of Italy and Spain and finalized numbers for France, Germany, and the Eurozone.

Expect Italy and the Eurozone’s PMIs to garner the greatest interest on Wednesday and Friday.

Service sector activity and consumer spending remain key to an economic rebound. That also brings May’s consumer spending figures for France and Germany into focus on Tuesday and Wednesday.

German unemployment figures for June on Wednesday will also be key. Any deterioration in employment conditions would be market negative

We would expect Eurozone unemployment figures on Thursday to have a muted impact on the majors.

From elsewhere

Private sector PMI’s out of China and consumer sentiment, ISM PMIs, and labor market numbers from the U.S will also influence…

Outside of numbers, expect particular attention to COVID-19 news and any further chatter on tariffs to remain key drivers.