European Equities: A Week in Review – 29/10/21

The Majors

It was a bullish week for the majors in the week ending 29^th October. The DAX30 rose by 0.94%, with the EuroStoxx600 and the CAC40 ending the week with gains of 1.47% and 1.44% respectively.

Disappointing business sentiment and 3^rd quarter GDP numbers left the DAX30 trailing the rest of the majors.

Better than expected stats from France, provided the CAC40 with a boost, however.

While the stats were influential, ECB monetary policy and views on inflation were key for the majors in the week.

On Thursday, ECB President Lagarde looked to quash market expectations of an ECB shift on interest rate policy. The ECB President reaffirmed the ECB’s transitory view on inflation.

Corporate earnings were also market positive for the European majors in the week.

The Stats

In October, the Ifo Business Climate Index fell from 98.9 to 97.7, weighed by business expectations. The Business Expectations sub-index slid from 97.4 to 95.4, while the current assessment sub-index slipped from 100.4 to 100.1.

Consumer sentiment improved, however, with the GfK Consumer Climate Indicator up from 0.4 to 0.9.

In the 2^nd half of the week, German unemployment figures were upbeat for October.

A 39k fall in unemployment led to a fall in the unemployment rate from 5.5% to 5.4%.

At the end of the week, 3^rd quarter GDP numbers and Eurozone inflation figures for October were key, however.

With GDP numbers from France, Germany, and Spain delivering mixed results, the Eurozone economy grew by 2.2% in the 3^rd quarter. The economy had expanded by 2.1% in the previous quarter.

More significantly, however, was another marked pickup in inflationary pressure.

According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 3.4% to 4.1%.

On the monetary policy front, the ECB left policy unchanged, which was in line with expectations.

With inflationary pressures persisting, however, the ECB continued to view inflationary pressures as transitory. The comments suggested status quo on interest rates for the foreseeable future, delivering support.

From the U.S

Early in the week, Consumer confidence and core durable goods and durable goods orders were in focus.

The numbers were skewed to the positive, with a jump in consumer confidence key. In October, the CB Consumer Confidence Index rose from 109.8 to 113.8.

Core durable goods orders increased by a further 0.4% in September following a 0.3% rise in August.

In the 2^nd half of the week, the stats were mixed, however.

GDP numbers for the 3^rd quarter disappointed, with the U.S economy growing by just 2.0%. In the 2^nd quarter, the economy had expanded by 6.7%.

Jobless claims were more upbeat, however, with initial jobless claims falling from 291k to 280k in the week ending 22^nd October.

At the end of the week, inflation and personal spending wrapped things up.

In September, personal spending rose by 0.6% following a 1.0% increase in August.

More significantly, however, was persistent inflationary pressure at the end of the 3^rd quarter.

In September, the Core PCE Price Index was up by 3.6% year-on-year. The annual rate of inflation held steady from August, while falling short of forecasts.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen fell by 1.27% to buck the trend in the week. Continental and Daimler led the way, however, with gains of 3.25% and 4.13% respectively. BMW also found support, rising by 1.86%.

It was a bearish week for the banking sector, however. Deutsche Bank slid by 4.09%, with Commerzbank declining by 0.63%. Disappointing earnings left Deutsche Bank in the deep red, with the markets responding to weak investment banking and trading revenues.

From the CAC, it was a bullish week for the banks. Soc Gen rose by 1.16% to lead the way, with BNP Paribas and Credit Agricole ending the week up by 0.33% and by 0.69% respectively.

It was a mixed week for the French auto sector, however. Stellantis NV rose by 2.37%, while Renault slipped by 0.29%.

Air France-KLM partially reversed a 7.03% slide from the previous week, rising by 3.91%. Airbus rose by a more modest 0.75%, however.

On the VIX Index

It was back into the green for the VIX in the week ending 29^th October, ending a run of 3 consecutive weeks in the red.

Reversing a 5.34% fall from the previous week, the VIX rose by 5.38% to end the week at 16.26.

2-days in the green from 5 sessions, which included a 4.86% rise on Tuesday and a 6.26% jump on Wednesday delivered the upside.

For the week, the NASDAQ rallied by 2.71%, with the Dow and the S&P500 ending the week up by 0.40% and by 1.33% respectively.

The Week Ahead

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

Key stats will include private sector PMIs and German retail sales, factory orders, and industrial production figures.

Expect any revisions to the Eurozone’s prelim PMIs and the stats from Germany to be key.

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

From the U.S, it’s a particularly busy week ahead.

The market’s preferred ISM-survey private sector PMIs will be in focus along with nonfarm payrolls.

While both sets of numbers will be of material influence, the FED monetary policy decision on Wednesday will be the key driver.

Following weak GDP numbers from the U.S, persistent inflation has raised some uncertainty over the outlook on interest rates.

From elsewhere, private sector PMIs from China will also influence. China’s Caixin Manufacturing PMI will set the tone on Monday.

Away from the economic calendar, corporate earnings will also provide the majors with direction, however.