European Equities: A Week in Review – 29/04/22

The Majors

It was a bearish week for the European majors in the week ending April-29, 2022.

The CAC40 fell by 0.73%, with the EuroStoxx600 and the DAX seeing losses of 0.64% and 0.31%, respectively.

After a bearish start to the week, corporate earnings supported riskier assets in the week. The upside was modest, however, with market sentiment towards the global economy and Fed monetary policy weighing heavily on risk sentiment.

On Friday, the Financial Times reported China’s politburo “promising to strengthen macro adjustments and achieve full-year economic and social development goals.”

China’s pledge to support the economy also delivered the European majors with support.

While the weekly losses were modest, it was a bearish month, with the DAX sliding by 2.20% and the CAC and EuroStoxx600 falling by 1.90% and 1.20%, respectively.

China’s COVID-19 lockdown measures and the ongoing war in Ukraine raised further concerns over supply chain disruption. Fed Chair Powell’s talk of aggressive policy moves to curb inflation and jitters over the threat of a recession were also market negative in the month.

The Stats

Early in the week, German business and consumer sentiment diverged. While business sentiment improved, consumer sentiment weakened further.

The Ifo Business Climate Index increased from 90.8 to 91.8 in April, while the Gfk German Consumer Climate Index fell from -15.7 to -26.5.

In the second half of the week, the market focus shifted to inflation and economic growth.

The stats were market positive, with German and the Eurozone GDP numbers for the first quarter providing support.

In Q1 2022, the German economy expanded by 4.0% year on year, up from 1.8% in the previous quarter.

The Eurozone’s economy grew by 5.0% year on year, up from 4.6% in the quarter prior.

On the inflation front, inflationary pressures ticked up further, though only moderately. According to prelim figures, the Eurozone’s annual rate of inflation picked up from 7.4% to 7.5%.

From the US

Core durable goods orders and consumer sentiment drew interest on Tuesday. The stats were market positive, with core durable goods orders rising by 1.1% in March.

Consumer sentiment held steady in April, which was also market positive. The CB Consumer Confidence Index slipped from 107.6 to 107.3.

On Thursday, US GDP numbers disappointed, however, with the US economy contracting by 1.4%. In the previous quarter, the economy expanded by 6.9%.

At the end of the week, inflation and personal spending were market positive. Personal spending rose by 1.1% in March, while inflationary pressures softened. In March, the Core PCE Price Index increased by 5.2% year on year, down from 5.3% in February.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rallied by 3.66%, with Continental gaining 0.64%. Volkswagen slid by 2.43%, however, with BMW ending the week flat.

It was a bearish week for the banking sector. Deutsche Bank tumbled by 12.68%, with Commerzbank sliding by 7.65%.

From the CAC, it was a bearish week for the banks. BNP Paribas and Soc Gen saw losses of 3.90% and 3.66%, respectively, with Credit Agricole falling by 1.05%.

It was another mixed week for the French auto sector. Stellantis NV slipped by 0.37%, while Renault ended the week up 1.59%.

Air France-KLM slid by 4.24%, while Airbus ended the week with a 0.84% gain.

On the VIX Index

It was a fourth consecutive week in the green for the VIX in the week ending April-29.

Following a 24.27% surge from the previous week, the VIX jumped by 18.40% to end the week at 33.40.

2-days in the green from 5 sessions, which included a 24.06% surge on Tuesday and an 11.37% jump on Friday, delivered the upside.

In the week, the NASDAQ slumped by 3.93%, with the Dow and the S&P500 sliding by 2.47% and 3.27%, respectively.

The Week Ahead

It is a busy week ahead on the Eurozone economic calendar.

On Monday, manufacturing PMIs and German retail sales will draw interest ahead of German unemployment figures on Tuesday.

On Wednesday, the market attention will shift to service sector PMIs, German trade data, and Eurozone retail sales.

Over the remainder of the week, the German economy will remain in the spotlight. On Thursday, German factory orders are due out ahead of industrial production figures on Friday.

From the US, it is a big week ahead. On the economic data front, ISM survey PMIs will influence this Monday and Wednesday, with Wednesday’s ISM Non-Manufacturing PMI the main driver.

The US labor market will also be in focus, with the ADP nonfarm employment change figures and official nonfarm numbers due out on Wednesday and Friday.

The main event of the week, however, is the FED’s monetary policy decision. A larger than expected rate hike will spook the markets.

Away from the economic calendar, corporate earnings will continue to provide direction. The majors could be in for a tough time following Amazon.com’s earnings after the European close on Friday.

News updates on the war in Ukraine will also need monitoring throughout the week.