European Equities: A Week in Review – 01/11/19

The Majors

It was another positive week for the European majors, with the CAC40 up by 0.69% to lead the way. The DAX30 and Eurostoxx600 saw more modest gains of 0.52% and 0.36% respectively.

For the DAX30 and EuroStoxx600, 0.73% and 0.68% gains respectively on Friday delivered the upside for the week. For the CAC40, a 0.56% rise added to the upside from earlier in the week.

Corporate earnings, economic data, and monetary policy were all in focus in the week, as was chatter from the U.S and China on trade.

On the trade front, news of China having doubts over the possibility of a long-term trade agreement with the U.S weighed mid-week.

Corporate earnings also pressured the DAX, with Deutsche Bank seeing particularly heavy losses following Wednesday’s 3^rd quarter earnings release.

It was the stats that ultimately provided the upside for the majors in the week.

The Stats

It was a busy week on the Eurozone economic calendar.

The markets had to wait until Wednesday, however, to digest any material data.

For the DAX30, disappointing unemployment figures for October and weaker than anticipated September retail sales figures weighed.

While the unemployment rate held steady at 5%, a larger than expected 6k rise in unemployment was negative on Wednesday. A 0.1% rise in retail sales fell short of a forecasted 0.3% rise, also weighing.

On Friday, manufacturing PMI numbers out of China provided the upside, however. In October, the PMI rose from 51.4 to 51.7, coming in ahead of a forecasted 51.0.

For the CAC40, stats were mixed, with better than expected 3^rd quarter GDP numbers offsetting disappointing September consumer spending figures.

The economy grew by 0.3% in the 3^rd quarter, quarter-on-quarter, which was at the same pace as in the 2^nd quarter. Economists had forecast a GDP of 0.2%.

Consumer spending fell by 0.4%, following a 0.1% rise in August, however. Economists had forecast a 0.1% rise.

From the Eurozone, 3^rd quarter GDP numbers were skewed to the positive. While the GDP eased from 1.2% to 1.1% year-on-year, the GDP rose by 0.2% quarter-on-quarter, which was at the same pace as the 2^nd quarter. Economists had forecast a GDP of 0.1%.

For the broader market, Eurozone unemployment and inflation figures had a muted impact on Thursday, with negative sentiment towards trade muting the impact of economic data on the day.

From the U.S, nonfarm payrolls provided further support to the European majors on Friday.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental bucked the trend, sliding by 1.46% in the week. The losses came in spite of a 2.24% rally on Friday. BMW led the way for the week, rising by 1.02%, the upside coming off the back of a 1.02% gain on Friday.

Volkswagen and Daimler saw more modest gains of 0.28% and 0.11% respectively. Volkswagen rose by 0.85% on Friday, with Daimler up by 0.50% to reverse losses from earlier in the week.

It was a bearish week for the banking sector. Deutsche Bank slid by 7.55%, with Commerzbank down by 0.37%.

From the CAC, the banks also struggled. Credit Agricole led the way, sliding by 1.75%. PNP Paribas and Soc Gen weren’t far behind with losses of 1.09% and 1.34% respectively.

The French autos sector also saw red. Peugeot and Renault’s slid by 5.96% and by 4.70% respectively.

In the week, merger talks between Fiat Chrysler and PSA Peugeot Citroen ultimately weighed on Peugeot, with Fiat Chrysler finding upside from the prospect of a merger.

On the VIX Index

The VIX Index fell by 2.77% in the week ending 1^st November. Following on from an 11.23% slide from the previous week, the VIX ended the week at 12.3.

Upward momentum through the first half of the week saw the VIX hit a week high 14.0 on Thursday before sliding back to sub-13 levels.

Better than expected data out of China and the U.S on Friday ultimately led to a 5^th consecutive week in the red for the VIX.

The Week Ahead

It’s a relatively busy week on the Eurozone economic calendar. October’s finalized manufacturing and service sector PMIs are due out on Monday and Wednesday. Barring dire numbers out of Italy and Spain, the Eurozone’s composite will likely have the greatest impact.

September factor order numbers out of Germany on Wednesday and German industrial production and Eurozone retail sales figures on Thursday will also provide direction.

On Friday, expect Germany’s trade data for September to also influence.

Outside of the stats, the Eurozone’s economic bulletin, due out on Thursday, will also need considering.

From elsewhere, U.S factory orders on Monday and the U.S ISM Non-Manufacturing PMI on Tuesday will also provide direction.

On the geopolitical front, chatter from Beijing and the U.S on trade requires monitoring as will the latest polls in the UK.

There are also corporate earnings to track throughout the week.

It could be a bearish week ahead should the U.S and China fail to make progress on trade…