European Equities: A Week in Review – 30/10/20It was a particularly bearish week for the European majors. Economic data took a back seat, with U.S politics and COVID-19 weighing heavily.
It was yet another bearish week for the European majors in the week ending 30th October. The DAX30 slid by 8.61%, with the CAC40 and EuroStoxx600 ending the week down by 6.42% and by 5.56% respectively.
The 2nd wave of the COVID-19 pandemic weighed heavily on the European majors in the final week of the month.
France reintroduced lockdown measures, with Germany and other EU member states having to follow, as new COVID-19 cases surged by record numbers.
While the Eurozone’s economy rebounded in the 3rd quarter, the reintroduction of lockdown measures paints a gloomy outlook for the 4th quarter.
Adding to the market angst was market sentiment towards the U.S Presidential Election that will take place next week. Uncertainty over the outcome and the fear of political deadlock added further downward pressure on the majors.
Economic data from the Eurozone provided some relief at the end of the week but not enough to reverse losses from earlier in the week.
It was a relatively busy week on the Eurozone economic calendar.
In the early part of the week, German’s IFO business climate figures were in focus. In October, the Business Climate Index fell from 93.2 to 92.7, with a fall in the Expectations sub-index dragging the Index down. The Business Expectations sub-index fell from 97.4 to 95.0, while the Current Assessment sub-index rose from 89.2 to 90.3.
The focus then shifted to German unemployment figures and the ECB on Thursday.
While unemployment numbers for October impressed, the ECB delivered a gloomy outlook, while also promising further monetary policy support next month.
The promise of further easing led to a slide in the EUR, which did provide the DAX30 with some support on the day.
Wrapping up the week were 3rd quarter GDP numbers and consumer spending and inflation figures.
While GDP numbers from France, Germany, and the Eurozone impressed, concerns over the economic outlook softened the impact on the majors.
Consumer spending and inflation figures disappointed, however.
Ahead of the surge in new COVID-19 cases in October and the reintroduction of lockdown measures, both France and Germany saw consumer spending slump in September.
Deflationary pressures also persisted, according to prelim figures for October. Consumer prices across the Eurozone fell by 0.3% in October, following a 0.3% decline in September.
From the U.S
It was also a busy week on the economic data front.
In the early part of the week, durable goods and core durable goods orders along with consumer confidence figures were in focus.
While durable goods and core durable goods orders rose in September, consumer confidence weakened in October.
Concerns over the jump in new COVID-19 cases and uncertainty over the U.S Presidential Election weighed on confidence.
On Thursday, 3rd quarter GDP numbers and the weekly jobless claims were positive, though also had a muted impact on the markets.
While the U.S economy surged by 33.1%, reversing a 31.4% contraction in the 2nd quarter, concerns over the economic outlook weighed.
Jobless claims figures also continued to suggest that the labor market recovery had hit a speed bump. In the week ending 23rd October, initial jobless claims came in at 751k, down from 791k from the previous week.
At the end of the week, personal spending and Chicago PMI numbers were upbeat, with inflationary pressures picking up in September.
The Market Movers
From the DAX, it was a particularly bearish week for the auto sector. Continental and Volkswagen tumbled by 9.37% and by 9.41% respectively to lead the way down. Things were not much better for BMW and Daimler, which slid by 7.70% and by 7.80% respectively.
It was also a bearish week for the banking sector. Commerzbank and Deutsche Bank ended the week with losses of 1.72% and 11.57% respectively.
From the CAC, it was a particularly bearish week for the banks. BNP Paribas tumbled by 10.90% to lead the way down. Credit Agricole and Soc Gen slid by 9.84% and by 8.71% respectively.
The French auto sector also saw deep red. Peugeot fell by 6.48%, with Renault tumbling by 14.21%.
Air France-KLM slumped by 14.59%, with Airbus sliding by 8.0%.
On the VIX Index
It was the 5th week in the green from 6 for the VIX. In the week ending 30th October, the VIX jumped by 38%. Following on from a 0.51% gain in the previous week, the VIX ended the week at 38.02.
A lack of progress towards a U.S Stimulus Bill, Presidential Election jitters, and rising COVID-19 cases, supported the VIX.
Economic data and upbeat earnings failed to provide support, with concerns over the economic outlook weighing more heavily.
For the week ending 30th October, the Dow slid by 6.47%, with the NASDAQ and S&P500 falling by 5.51% and by 5.64% respectively.
The Week Ahead
It’s a busy week ahead on the Eurozone economic calendar.
In the 1st half of the week, private sector PMI figures for Italy and Spain are in focus. Finalized PMIs for France, Germany, and the Eurozone will also draw plenty of attention.
Expect any upbeat numbers to have a muted impact, however. Lockdown measures are expected to sink private sector activity in November.
Later in the week, German factory orders and Eurozone retail sales figures are due out on Thursday.
German industrial production figures for September wrap things up for the week.
The impact of the stats will largely be dependent upon the outcome of the U.S Presidential Election, COVID-19 news, and updates on Brexit.
As things stand, risks to the Eurozone economy remain heavily tilted to the downside.
From elsewhere, private sector PMIs from China and the U.S. will be in focus. October’s labor market stats from the U.S will also influence late in the week.
Away from the economic calendar, however, expect the U.S Presidential Election and COVID-19 news updates to be the key drivers.