European Equities: A Week in Review – 31/12/21

The Majors

It was a bullish final week of the year for the European majors in the week ending 31^st December.

The EuroStoxx600 rose by 1.10%, with the CAC40 and the DAX30 ending the week up by 0.94% and by 0.82% respectively.

Following another bullish week, the majors also had a bullish final month of the year. The CAC40 led the way, rising by 6.43%, with the DAX30 and the EuroStoxx600 gaining 5.20% and 5.37% respectively. In spite of COVID-19 and the new Omicron strain, it was a particularly bullish year for the CAC40, which rallied by 28.9% in 2021. The EuroStoxx600 and DAX30 trailed, however, with gains of 22.3% and 15.8% respectively.

Economic data was on the lighter side in the week, with key stats from the U.S providing some support in thin trading.

In a shortened week for a number of key markets, news updates on the Omicron strain delivered support. Reports of fewer hospitalizations and milder cases, in spite of the surge in new cases, were key. Positive reports from vaccine manufacturers over the effectiveness of boosters were also a market positive. In the week, Johnson & Johnson had reported that a booster shot would be 85% effective at preventing hospitalization.

The Stats

Unemployment figures from France and inflation figures from Spain were the key stats in the week.

In November, jobseeker totals declined from 3,142.5k to 3,087.8k.

More significantly, however, was a marked pickup in inflationary pressure in Spain.

According to prelim figures, Spain’s annual rate of inflation accelerated from 5.5% to 6.7%. Economists had forecast a more modest pickup to 5.7%.

From the U.S

Jobless claims and Chicago’s PMI figures were the key stats in the week, with the markets looking to assess the impact of the Omicron strain on labor market conditions.

In the week ending 24^th December, initial jobless claims fell from 206k to 198k. Economists had forecast an increase to 208k.

In December, Chicago’s PMI rose from 61.8 to 63.1, which was also market positive.

Other stats in the week included goods trade data, inventory, and housing sector figures. The stats had a muted impact on the majors, however.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and BMW fell by 0.76% and by 0.78% respectively, with Daimler sliding by 3.57%. Volkswagen bucked the trend, ending the week up by 0.33%.

It was a bearish week for the banking sector, however. Deutsche Bank and Commerzbank fell by 1.55% and by 0.30% respectively.

From the CAC, it was a bullish week for the banks. BNP Paribas rallied by 1.71%, with Soc Gen and Credit Agricole ending the week with gains of 0.90% and 0.48% respectively.

The French auto sector also had a bullish week. Stellantis NV rose by 0.53%, with Renault rallying by 2.62%.

Air France-KLM ended the week down by 1.80%, while Airbus increased by 0.61%.

On the VIX Index

It was a 2^nd consecutive week in the red for the VIX in the week ending 31^st December, marking a 3^rd loss in 7-weeks.

Following a 16.74% slide from the previous week, the VIX fell by 4.12% to end the week at 17.22.

4-days in the red from 5 sessions, which included an 3.36% fall on Wednesday, delivered the downside.

For the week, the NASDAQ slipped by 0.05%, while the Dow and the S&P500 ended the week up by 1.08% and 0.85% respectively.

The Week Ahead

It’s busy week ahead on the Eurozone economic calendar. Key stats include private sector PMIs for member states and the Eurozone and economic data from Germany.

At the start of the week, manufacturing PMI numbers for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone will be in focus. Barring revisions to prelim numbers, expect Italy and the Eurozone’s PMIs to be key.

On Tuesday, German retail sales an unemployment figures will be in focus ahead of service sector PMIs on Wednesday.

Through the remainder of the week, German factory orders, inflation, industrial production, and trade data will also be key, however.

From the U.S, it’s also a busy week ahead. ISM Manufacturing and Non-Manufacturing PMI numbers will be key. On Thursday, jobless claims will also draw interest ahead of nonfarm payrolls on Friday.

From Elsewhere

China’s Caixin manufacturing PMI will also influence on Tuesday.

Away from the Economic Calendar

News updates on the new Omicron strain will need continued monitoring alongside any central bank chatter.