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European Equities: A Week in Review – 28/12/19

The European majors found support over the holidays, with stats on the lighter side. Economic data will need to impress for further gains to come.
Bob Mason
Businessman touching stock market graph on a virtual screen display.

The Majors

It was a relatively bullish week for the European equity majors in the week ending 27th December, with the EuroStoxx600 rising by 0.32% to lead the way.

The CAC40 and DAX30 saw more modest gains of 0.26% and 0.14% in the shortened week.

For the DAX30, a pullback at the start of the week left Friday to deliver a recovery to end the week in the green.

The German markets were closed on Tuesday, Wednesday, and Thursday, while the EuroStoxx600 and CAC40 traded a half-day on Tuesday ahead of Wednesday and Thursday’s closures.

Positive sentiment towards the U.S – China phase 1 trade agreement provided the upside in the week that saw the EuroStoxx600 hit record highs.

Comments from both Beijing and Washington in the week continued to support risk appetite that drove the EUR back to $1.11 levels.

The Stats

It was a particularly quiet week on the Eurozone economic calendar, with no material stats to provide the majors with direction.

While there were no stats from the Eurozone, the ECB’s economic bulletin, provide support on Friday.

The ECB delivered a slightly rosier picture on the economic outlook, with incoming economic data and surveys pointing to some stabilization in the slowdown of economic growth within the Eurozone.

Growth forecasts for 2020 were revised down to 1.1%, however, though economic growth is expected to pick up to 1.4% in 2021.

Judging from the bulletin, employment and wage growth remain key when considering the ECB’s more optimistic outlook.

From elsewhere, U.S durable goods orders and core durable goods orders didn’t help on Monday. Durable goods orders slid by 2% in November. Core durable goods stalled, which was also negative, which weighed on the DAX30 and the EuroStoxx600 at the start of the week.

The Market Movers

From the DAX, it was another bearish week for the auto sector. BMW led the way, falling by 1.15%. Continental, Daimler, and Volkswagen saw more modest losses of 0.67%, 0.36%, and 0.26% respectively.

It was also a bearish week for the banking sector, with Deutsche Bank falling by 1.85% and Commerzbank by 2.51%.

From the CAC, it was a week in the red for the banks. BNP Paribas and Soc Gen led the way down, with losses of 1.10% and 1.02% respectively. Credit Agricole saw a more modest 0.31% loss for the week.

Things were not much better for the French auto sector. Peugeot and Renault fell by 1.98% and by 2.14% respectively.

On the VIX Index

The VIX Index rose by 6.17% in the week ending 27th December. Following on from a 0.95% rise from the previous, the VIX ended the week at 13.4.

For the VIX, the upside came in spite of the U.S equity markets enjoying fresh record highs in the week.

A 6.17% gain on Friday delivered the weekly gain, with the S&P500 ending the day flat and the NASDAQ in the red on Friday.

While phase 1 of the U.S – China trade agreement is wrapped up, a trade war is still ongoing.

Talk of market corrections has also done the rounds, with fresh record highs hit over the holidays. It wouldn’t be the first time that the majors hit the slopes in January.

The Week Ahead

It’s a busy week on the Eurozone economic calendar. In a shortened week, key stats include German retail sales figures on Monday that will influence ahead of the holidays.

The focus will then shift to manufacturing PMI numbers out of Italy and Spain due out on Thursday. Finalized PMIs out of France, Germany, and the Eurozone will also garner interest.

Barring any revisions to prelim numbers, however, we expect Italy and the Eurozone’s PMIs to have the greatest impact.

On Friday, December unemployment numbers from Germany will also provide direction at the end of the week.

From elsewhere

China’s private sector PMIs on Tuesday and Thursday will influence. There are also U.S consumer confidence and ISM manufacturing PMI numbers on Tuesday and Friday to provide direction.

Over the New Year period, the DAX30 is closed on Tuesday and Wednesday. The CAC40 and EuroStoxx600 are on a shortened session on Tuesday and closed on Wednesday.

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