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European Equities: A Week in Review – 27/11/20

The Majors

It was another bullish week for the European majors in the week ending 27th November.

The CAC40 rose by 1.86% to lead the way, with the DAX30 and EuroStoxx 600 gaining 1.51% and 0.93% respectively.

Through the week, market reaction to positive COVID-19 vaccine news delivered support. Pfizer Inc. and BioNTech announced that a vaccine would be available in a matter of days after FDA approval.

The news of an imminent vaccine allowed investors to focus on an economic recovery rather than economic damage caused by the COVID-19 pandemic.

Mid-week, however, disappointing economic data from the U.S and doom and gloom from the ECB did pin the majors back.

At the end of the week, however, the focus returned to the COVID-19 vaccine, which supported a bullish end to the week.

The Stats

It was a busy week on the economic calendar.

At the start of the week, private sector PMI numbers disappointed. While Germany continued to see growth, numbers from France were particularly disappointing.

Weaker numbers led to a fall in the Eurozone’s composite PMI from 50 to 45.1, with service sector numbers doing the damage.

From Germany, 3rd quarter GDP numbers came in ahead of prelim figures, though had a muted impact.

With containment measures in place, a slide in business and consumer sentiment were negatives in the week.

At the end of the week, stats from France wrapped things up.

French consumer spending, inflation, and finalized 3rd quarter GDP numbers were in focus. The stats were all skewed to the positive providing support.

In October, consumer spending rose by 3.7%, reversing most of a 4.4% decline from September, with consumer prices on the rise in November.

Consumer prices rose by 0.2%, with the harmonized index for consumer prices also rising by 0.2%. Both had stalled in October.

For the French economy, the 3rd quarter GDP was revised up from 18.2% to 18.7%.

While the stats were positive, November’s private sector PMIs from earlier in the week supported the ECB’s plans to make a move next month.

From the ECB, November’s financial stability review and monetary policy meeting minutes pegged the majors back on Wednesday and Thursday. Doom and gloom and economic uncertainty ahead weighed on the COVID-19 vaccine optimism.

From the U.S

In the 1st half of the week, prelim private sector PMI numbers for November impressed. The all-important services PMI rose from 56.9 to 57.7, with the manufacturing PMI climbing from 53.4 to 56.7.

Consumer sentiment waned in November, however, with the CB Consumer Confidence Index falling from 101.4 to 96.1. This was to be expected, with the latest spike in new COVID-19 cases and dire labor market conditions.

Mid-week, the weekly jobless claims, core durable goods orders, 3rd quarter GDP, and personal spending figures were in focus.

The stats were mixed. Initial jobless claims rose from 742k to 778k in the week ending 20th November. The latest figure further confirmed that the labor market recovery had stalled.

Core durable goods orders impressed with a 1.3% rise in October, with personal spending rising by 0.5% to come in ahead of forecasts. Spending was down from a 1.2% rise in September, however.

2nd estimate GDP numbers for the 3rd quarter were in line with 1st estimates, which came up short of a forecasted upward revision.

On the monetary policy front, the FOMC meeting minutes had a muted impact. The FED focus on the COVID-19 pandemic was somewhat dated following the latest COVID-19 vaccine updates.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler saw gains of 6.45% and 1.68% while BMW and Volkswagen fell by 1.08% and by 3.19% respectively.

It was a bullish week for the banking sector, however. Commerzbank rallied by 8.52%, with Deutsche Bank ending the week up by 5.33%.

From the CAC, it was another bullish week for the banks. BNP Paribas and Soc Gen rose by 7.03% and by 7.24% respectively, with Credit Agricole rallying by 10.17%.

The French auto sector found more support. Peugeot ended the week up by 3.09%, with Renault rallying by 10.60%.

COVID-19 vaccine news delivered yet more gains for Air France-KLM, which jumped by 27.78%, while Airbus saw a more modest 1.53% gain.

On the VIX Index

It was back into the red for the VIX, marking a 3rd weekly decline in 4-weeks. In the week ending 27th November, the VIX fell by 12.07%. Reversing a 2.60% gain from the previous week, the VIX ended the week at 20.84.

For the week, the NASDAQ rose by 2.96%, while the Dow and S&P500 seeing gains of 2.21% and 2.27% respectively.

VIX 281120 Weekly Chart

The Week Ahead

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

November private sector PMIs for Italy and Spain are in focus, along with finalized PMIs for France, Germany, and the Eurozone.

Expect Italy’s PMI and the Eurozone’s composite PMI to draw plenty of interest barring revisions to German and French PMIs.

From Germany, employment, retail sales, and factory orders for October will draw also interest in the week. With German manufacturing sector activity holdings its ground, expect the employment and retail sales figures to have the greatest impact.

Other stats include prelim inflation figures for November, which would likely have a muted impact on the majors.

From the U.S, the market’s preferred ISM private sector PMIs, weekly jobless claims, and nonfarm figures will influence.

Out of China, manufacturing sector PMI numbers due out on Monday and Tuesday will also provide direction.

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