European Equities: A Week in Review – 23/04/21

The Majors

It was a bearish week for the European majors in the week ending 23rd April, with a Tuesday sell-off doing the damage.

The DAX30 slid by 1.17%, with the CAC40 and the EuroStoxx600 seeing losses of 0.46% and 0.78% respectively.

A continued spike in new COVID-19 cases across the world weighed on the majors in the week.

Positive economic data and corporate earnings provided support to limit the damage, however.

Late in the week, U.S President Biden’s tax plans added downward pressure on the global equity markets.

News hit the wires late in the week that President Biden plans to raise long-term capital gains tax for the wealthiest Americans to 43.4%. The current top tax rate sits at 23.8% on long-term capital gains.

The Stats

It was a relatively busy week on the economic data front.

Key stats included German wholesale inflation and Eurozone consumer confidence figures.

At the end of the week, prelim private sector PMI numbers for April were also in focus.

The stats were skewed to the positive. Wholesale inflationary pressures picked up further, with consumer confidence across the Eurozone improving.

Key in the week, however, were the private sector PMIs.

While private sector activity in Germany expanded at a marginally slower rate, the services sector returned to growth across the Eurozone for the 1st time since Aug-2020.

At the turn of the quarter, the Eurozone’s manufacturing PMI hit a new all-time high, supporting a rise in the composite PMI to a 9-month high 53.7.

On the monetary policy front, the ECB was also in action in the week. In line with market expectations, the ECB stood pat on monetary policy, assuring continued support.

The decision to stand pat was positive for the European majors. From the press conference, ECB President Lagarde talked of an economic contraction in the 1st quarter, which supported the market view of unwavering policy support.

From the U.S

It was a quieter week on the economic data front.

Key stats included weekly jobless claims and prelim private sector PMI numbers for April.

In the week ending 16th April, initial jobless claims decreased from a revised 586k to 547k. Economists had forecast an increase to 617k.

Private sector PMIs were also positive for riskier assets.

In April, the manufacturing PMI increased from 59.1 to 60.6, with the services PMI rising from 60.4 to 63.1.

Economists had forecast PMIs of 60.5 and 61.9 respectively.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler and Volkswagen slid by 5.09% and by 6.02% respectively, with BMW falling by 2.44%. Continental bucked the trend, however, with a 0.60% gain.

It was a bearish week for the banking sector. Deutsche Bank slid by 5.94%, with Commerzbank falling by 0.66%.

From the CAC, it was a bearish week for the banks. BNP Paribas and Soc Gen slid by 4.52% and by 4.20% respectively. Credit Agricole ended the week down by a more modest 2.33%.

It was also a bearish week for the French auto sector. Renault and Stellantis NV saw losses of 6.67% and 5.71% respectively.

Air France-KLM followed a 7.78% slide with a 6.65% fall, with Airbus declining by 5.03%.

On the VIX Index

A run of 4 consecutive weeks in the red came to an end for the VIX in the week ending 23rd April. Reversing a 2.64% decline from the previous week, the VIX rose by 6.65% to end the week at 17.33.

3-days in the green from 5 delivered the upside in the week for the VIX.

 

In the week, the Dow ended the week down by 0.46%, with the NASDAQ and the S&P500 falling by 0.25% and by 0.13% respectively.

VIX 240421 Weekly Chart

The Week Ahead

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

German business, consumer confidence, and unemployment figures are in focus Monday through Thursday.

At the end of the week 1st quarter GDP numbers from France, Germany, Spain, and the Eurozone will also be key drivers.

Other stats in the week include prelim inflation figures from member states and the Eurozone.

The markets are expecting a continued pickup in inflationary pressures near-term, which should limit the impact on the majors.

From the U.S, core durable goods and consumer sentiment figures will influence early in the week.

On Thursday, weekly jobless claims and 1st quarter GDP numbers will also provide direction.

For the global financial markets, the FED’s monetary policy decision overnight on Wednesday will be key. With the markets expecting the FED to stand pat, the focus will be on the rate statement. Expect any hawkish chatter to weigh on the majors.

From China, private sector PMI figures on Friday will also influence.

Away from the economic calendar, corporate earnings, COVID-19 news, and geopolitics will need continued monitoring.