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European Equities: A Week in Review – 20/08/21

The Majors

It was a bearish week for the majors in the week ending 20th August.

The CAC40 slid by 3.91%, with the DAX30 and the EuroStoxx600 ending the week with losses of 1.06% and 1.48% respectively. For the EuroStoxx600, the loss ended a run of 4 consecutive weekly gains.

Economic data from the Eurozone was on the lighter side in the week, leaving COVID-19, U.S Stats, and the FED in focus.

Overnight FOMC meeting minutes from Wednesday sent the European majors into the deep red on Thursday.

While falling short of a taper tantrum, rising expectations of a near-term move by the FED weighed on riskier assets.

A continued spread of the Delta variant and disappointing economic data from China also weighed on the majors.

From China, industrial production increased by 6.4% in July, year-on-year. In June. industrial production had risen by 8.3%. Retail sales was up 8.5% compared with 12.1% in June.

The Stats

Eurozone employment, 2nd estimate GDP, and finalized inflation figures were in focus.

In line with 1st estimates, the Eurozone economy expanded by 2.0% in the 2nd quarter, rebounding from a 0.3% contraction in the previous quarter. While, the year-on-year, number was revised down from 13.7% to 13.6%, the numbers were good enough to support the majors.

Employment also picked up in the 2nd quarter, rising by 0.5% to reverse a 0.2% decline from the previous quarter.

On the inflation front, the Eurozone’s annual rate of inflation picked up from 1.9% to 2.2%, which was in line with prelim figures. The Eurozone’s core annual rate of inflation softened from 0.9% to 0.7%, which was also in line with prelim numbers.

From the U.S

Key stats included retail sales and jobless claims figures.

Retail sales figures disappointed. In July, retail sales fell by 1.1%, reversing a 0.7% rise from June. Economists had forecast a 0.3% decline. Core retail sales fell by 0.4% versus a forecasted 0.1% rise. In June, core retail sales rose by 1.6%.

On the positive side, however, were labor market numbers once more. In the week ending 13th August, initial jobless claims fell from 377k to 348k. Economists had forecast a decline to 363k.

On the monetary policy front, the FOMC meeting minutes from Wednesday weighed on riskier assets. FOMC member chatter also suggested an increased chance of a near-term move.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Daimler slumped by 7.66% to lead the way down, with BMW and Volkswagen ending the week down by 7.35% and 7.26% respectively. Continental saw a more modest 4.40% decline in the week.

It was also a bearish week for the banking sector. Deutsche Bank and Commerzbank fell by 4.83% and by 5.49% respectively.

From the CAC, it was a bearish week for the banks. Soc Gen slid by 6.19%, with BNP Paribas and Credit Agricole falling by 4.19% and by 4.39% respectively.

The French auto sector also struggled, with Stellantis NV and Renault sliding by 7.43% and by 7.48% respectively.

Air France-KLM and Airbus ended the week with losses of 4.94% and 4.30% respectively.

On the VIX Index

It was a back into the green for the VIX in the week ending 20th August.

Reversing a 4.33% fall from the previous week, the VIX rose by 20.13% to end the week at 18.56.

4-days in the green from 5 sessions, which included a 20.44% jump on Thursday delivered the downside. A 14.35% slide on Friday pared some of the gains, however.

For the week, the Dow fell by 1.11%, with the NASDAQ and the S&P500 ending the week down by 0.73% and by 0.59% respectively.

VIX 210821 Weeklly Chart

The Week Ahead

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

Early in the week, prelim August private sector PMIs for France, Germany, and the Eurozone will be in focus.

Expect plenty of interest in the numbers. There’s been lingering concerns over the sustainability of the economic recovery. Weak numbers would pressure the majors.

Through the remainder of the week, the German economy will be in focus.

2nd quarter GDP, business sentiment, and consumer sentiment figures will provide direction.

From the U.S, private sector PMIs, core durable goods, jobless claims, personal spending, and inflation will also influence.

On the monetary policy front, the FED will also be in the limelight once more. The FED’s annual Economic Policy Symposium is scheduled for 26th August to 28th August. With the markets expecting a tapering to the asset purchasing program, the markets will be expecting guidance on what’s to come.

Away from the economic calendar, COVID-19 news updates will also need monitoring.