European Equities: A Week in Review – 28.09.19

The Majors

It was a week in the red for the European majors. The CAC40 led the way down, falling by 0.88%, with the DAX30 and EuroStoxx600 declining by 0.7% and by 0.3% respectively.

It was another particularly busy week for the markets, with economic data and geopolitical risk in focus.

Geopolitics

Sentiment towards the U.S – China trade war was mixed through the week. While Trump talked up the willingness to reach an agreement with China, an unwillingness to extend the waiver for U.S firms to supply Huawei pressured the majors.

U.S politics and Brexit woes also pressured the majors. A lack of progress on Brexit was negative, as was impeachment talk in the U.S.

Monetary Policy

ECB President Draghi reiterated the ECB’s commitment to delivering further monetary policy easing at the start of the week.

The ECB’s economic bulletin, on Thursday, did little to support the majors following some particularly disappointing stats at the start of the week.

The Stats

It was a relatively busy week on the Eurozone economic calendar. Key stats included prelim private sector PMI numbers on Monday that sent the majors into the red at the start of the week.

Having steadied in August, there had been hopes of further improvement in September. The Prelim figures painted yet more dire conditions. While manufacturing sector activity saw the pace of decline accelerate, service sector activity slowed, adding to the doom and gloom.

German business and consumer sentiment figures later in the week provided some support, however, but not enough to reverse losses from the start of the week.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Daimler and Volkswagen led the way down with losses of 4.29% and 3.12% respectively. BMW and Continental saw more modest losses of 2.02% and 1.67% respectively.

Things were no better for the banking sector. Deutsche Bank slid by a further 4.69%, while Commerzbank tumbled by 6.12%, following on from the previous week’s 5.3% loss.

From the CAC, the banks also struggled. BNP Paribas and Credit Agricole fell by 2.44% and by 1.46% respectively. Soc Gen slid by 4.88% following the previous week’s trend-bucking 0.88% gain. French autos saw red for a second consecutive week. Renault slid by 5.92%, with Peugeot falling by 4.25%.

On the VIX Index

The VIX Index rose by 3.12% in the week. Following on from an 8.51% gain from the previous week, the VIX ended the week at 17.12.

Geopolitical risk and market reaction to dire economic data out of the Eurozone delivered the upside in the week.

The Week Ahead

It’s a busy week on the Eurozone economic calendar. Key drivers include September private sector PMI numbers due on Tuesday and Thursday. Barring material deviation from prelims, the focus will be on Italy, Spain and the Eurozone’s numbers.

German unemployment and retail sales figures due out on Monday will also influence.

Barring any material pickup in inflationary pressures, we would expect Spanish, German, and Eurozone inflation figures to have a muted impact on the majors.

From elsewhere, private sector PMI numbers out of China on Monday will likely set the tone ahead of nonfarm payroll and wage growth figures out of the U.S on Friday.

Expect ISM survey PMI numbers from the U.S on Tuesday and Thursday and the ADP nonfarm employment figures on Wednesday to also influence.

Outside of numbers, chatter from Beijing and Washington on trade and Brexit news will continue to have an impact. There is also impeachment talk and Brexit to consider.