It was a mixed week for the European majors in the week ending 10th July. Partially reversing a 1.99% gain from the previous week, the CAC40 fell by 0.73% to lead the way down.
The DAX30 and EuroStoxx600 reversed losses on Friday, however, to end the week with gains of 0.84% and 0.38% respectively.
It had been a bullish start to the week before the majors hit reverse.
Optimism over a swift economic recovery shifted to material concerns over a rising number of new COVID-19 cases in the U.S and beyond.
While the U.S administration remained adamant over a continued reopening of the country, the COVID-19 numbers suggested otherwise.
In the week, the WHO had also acknowledged that there was emerging evidence of airborne transmission of the coronavirus. A lack of social distancing and a continued reopening across the U.S in particular, coupled with airborne transmission sounded the alarm bells.
A bullish end to the week, however, came as the markets responded to industrial production figures from Italy and France.
It was a relatively busy week on the Eurozone economic calendar.
Key stats included May Factory orders, industrial production and trade data from Germany. While many economies had reported sharp rebounds from the dire numbers from April, Germany’s were less impressive.
Factory orders rose by 10.4%, partially reversing a 26.2% slump in April. Industrial production rose by just 7.8% following a 17.5% slide in April. Both sets of numbers fell short of forecasts to pin back the European majors.
Germany trade figures were positive later in the week but were not good enough to ease concerns over COVID-19.
German construction numbers for June and Eurozone retail sales figures for May had little influence in the week.
At the end of the week, industrial production figures from France and Italy provided much-needed support.
In Italy, industrial production surged by 42.1% in May, reversing a 20.5% slide from April. France reported a 19.6% jump in production, which reversed a 20.6% slide from April. The recoveries were far more impressive than Germany’s that had weighed on the majors earlier in the week.
From the U.S
The stats were skewed to the positive, with the markets preferred ISM Non-Manufacturing PMI jumping from 45.4 to 57.1.
JOLTs job openings for May were also positive, rising from 4.996m to 5.397m, with initial jobless claims rising by 1.314m. This was down from 1.413m in the week prior.
Ultimately, however, the positive stats had little influence mid-week. The rising number of COVID-19 cases across the U.S suggests a possible reversal of the recent improvement in economic indicators…
The Market Movers
From the DAX, it was a mixed week for the auto sector. BMW and Volkswagen led the way, with gains of 2.26% and 3.03% respectively. Continental and Daimler ended the week with losses of 1.59% and 0.16% respectively.
It was also a bullish week for the banking sector. Commerzbank jumped by 10.35%, with Deutsche Bank gaining 5.81%.
WIRECARD AG fell by 23.01%, partially reversing a 131.21% gain from the previous week.
From the CAC, it was a mixed week for the banks. BNP Paribas and Credit Agricole rose by 1.10% and 1.49% respectively, while Soc Gen fell by 0.85%.
The French auto sector also had a mixed week, with Peugeot falling by 1.75%, while Renault gained 0.54%
Air France-KLM and Airbus ended the week down by 4.39% and by 0.27% respectively.
On the VIX Index
It was a 4th consecutive week in the red for the VIX. In the week ending 10th July, the VIX fell by 1.41%. Following on from a 20.3% tumble from the previous week, the VIX ended the week at 27.29.
Economic data from the U.S managed to support gains for the U.S majors. The weekly gains across the U.S majors came in spite of the widespread spike in new COVID-19 cases.
At the end of the week, the Dow and S&P500 found strong support on news of progress towards a successful treatment drug.
The S&P500 ended the week up by 1.76%, with the Dow and NASDAQ gaining 0.96% and by 4.01% respectively.
The Week Ahead
It’s a quieter week on the Eurozone economic calendar. Key stats include July’s ZEW Economic Sentiment figures for Germany and the Eurozone.
The Eurozone’s industrial production and trade data for May should have a muted impact on the majors in the week.
There are also finalized inflation figures that will likely be brushed aside by the markets.
On Thursday, expect the ECB’s monetary policy decision to be the main event of the week. There has been some recent discord within the ranks. This will make the ECB press conference all the more interesting…
Economic data out of China, which includes 2nd quarter GDP figures, will garner plenty of attention in the week. There has been plenty of optimism over a sharp economic rebound in China. The proof will be in the pudding…
If that’s not enough, there are also trade data and industrial production and fixed asset investment figures for June to consider…
From the U.S, June retail sales and industrial production figures, together with July manufacturing sector PMIs will provide direction.
Away from the Economic Calendar
COVID-19 numbers and related news in the week will also have a material impact on the majors. If the situation worsens, expect risk appetite to wane. While news late in the week of successful treatment was positive, the latest spread does continue to jeopardize a swift economic recovery.
And, if that’s not enough, earnings season kicks off this coming week…