European Equities: A Month in Review – July 2021

The Majors

It was another bullish month for the European majors in July, logging a 6th consecutive monthly gain.

The CAC40 and the EuroStoxx600 rose by 1.61% and by 1.97% respectively, while the DAX30 struggled, rising by just 0.09%.

It was a choppier month for the European majors. Concerns over the resilience of the economic recovery tested support for the majors at the start of the 3rd quarter of the year.

A continued rise in new COVID-19 cases across the world added to the market angst in the month.

Economic data from Germany was also disappointing, pegging the DAX30 back.

Central bank assurance of support, dip buying, corporate earnings, and economic data for France and the Eurozone delivered support, however.

The Stats

Key stats in the month included inflation, consumer spending, consumer sentiment, private sector PMIs, and 2nd quarter GDP numbers.

Once more, the stats were skewed to the positive, delivering support to the broader market.

The Private Sector

The Eurozone’s composite PMI rose from 59.5 to 60.6 in July, according to prelim numbers. Service sector activity picked up, delivering the upside at composite level.

Germany’s Manufacturing PMI increased from 65.1 to 65.6, which was key as private sector activity across France saw slower growth.

As a result of weak numbers from France, the Eurozone’s Manufacturing PMI fell from 63.4 to 62.6.

The German Economy

From Germany, while survey-based numbers were upbeat, non-survey-based data disappointed in the month.

Factory orders (-3.7%) and industrial production (-0.30%) were weak, with Germany’s trade surplus narrowing from 15.9bn to 12.6bn EUR.

German business and consumer confidence also failed to impress in spite of the reopening of the economy. Rising cases of the Delta variant across the world raised uncertainties over the economic outlook in the month.

Late in the month, 1st estimate GDP numbers for the 2nd quarter were also in focus.

The German economy expanded by 1.5%, quarter-on-quarter, partially reversing a 2.1% contraction from the previous quarter. Economists had forecast 1.9% growth.

A positive in the week, however, was a fall in the unemployment rate from 5.9% to 5.7%, which should support consumption.

The Eurozone

For the Eurozone, the economy expanded by 2.00% in the 2nd quarter, reversing a 0.3% contraction from the previous quarter.

The numbers were aligned with the ECB’s optimistic outlook on the economic recovery.

Inflation

In the month, the ECB also revised its price stability target, increasing the inflation target to 2.0%. The move was viewed as dovish, giving the ECB more legroom before having to make a move on the policy front.

In spite of this, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, according to prelim figures.

From the U.S

Economic data delivered mixed results for the markets.

Inflationary pressures continued to build, though following assurances from the FED, failed to spook the markets.

The market’s preferred ISM private sector PMIs for June were disappointing for June, which raised concerns over the economic recovery.

Weekly jobless claim figures also failed to impress, with claims falling to a month low 360k before climbing to a high 419k.

In the final week of the month, consumer confidence and 2nd quarter GDP numbers delivered mixed results.

Consumer confidence picked up in July, suggesting a further increase in consumption. In June, retail sales had risen by a modest 0.5%. On the economic growth front, however, the U.S economy grew by just 6.5% in the quarter, falling well short of a forecasted 8.5%.

Monetary Policy

In July, both the ECB and the FED left monetary policy unchanged. Both central banks delivered assurances of unwavering support, ultimately propping up the European majors in the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in June. Continental and BMW slid by 7.88% and by 6.09% respectively. Daimler and Volkswagen ended the month down by 0.44% and by 2.49% respectively.

It was also a bearish month for the banks. Deutsche Bank fell by 2.86%, with Commerzbank sliding by 9.03%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas fell by 2.69%, with Credit Agricole and Soc Gen seeing losses of 0.42% and 0.52% respectively.

It was also a bearish month for the auto sector. Renault slid by 6.02%, with Stellantis NV ending the month down by 2.20%.

Air France-KLM fell by a further 3.71%, while Airbus SE rallied by 6.69%.

On the VIX Index

It was a first monthly gain in 6-months for the VIX in July.

Reversing a 5.55% loss from June, the VIX rose by 15.22% to end the month at 18.24.

In July, the S&P500 rallied by 2.27%, with the Dow and the NASDAQ ending the month up by 1.25% and by 1.16% respectively.

VIX 310721 Monthly Chart

The Month Ahead

Following some mixed numbers from Germany, we can expect increased sensitivity to the German numbers in the month ahead.

Private sector PMIs will also remain key, with any fall back in private sector PMIs likely to test support for the majors.

Following the latest spike in inflation, a further pickup in inflationary pressure will also raise questions over consumption. As a key component of the economic recovery, any concerns over consumption would also pressure the majors.

From the U.S, labor market numbers will now be the key area of focus as inflationary pressures continue to pick up.

Consumer confidence and consumption numbers will need to impress to support riskier assets.

From elsewhere, private sector PMIs and trade data from China will also need tracking.

Away from the economic calendar, COVID-19 news will also need monitoring. As new cases continued to rise in July, the threat of a vaccine resilient variant remains, which would materially impact the growth outlook.

European Equities: A Week in Review – 30/07/21

The Majors

It was another choppy week for the majors in the week ending 30th July, with the majors taking another slide to kickstart the week.

The DAX30 fell by 0.80%, while the CAC40 and the EuroStoxx600 ended the week with relatively modest gains of 0.67% and 0.05% respectively.

Concern over the continued rise in new Delta variant cases weighed on the markets and sentiment towards the economic outlook.

Mixed economic data from Germany, in particular, also pressured the markets in the week.

There were a number of support avenues for the majors, however.

Upward growth revisions from the IMF for advanced economies, a dovish FED, and corporate earnings provided support.

GDP numbers from France and the Eurozone were also ahead of forecasts at the end of the week. The data limited the damage in what was a bearish end to the week.

The Stats

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

From the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 0.32% to buck the trend in the week. Continental slid by 2.49% to lead the way down, however. BMW and Volkswagen also struggled, ending the week down by 1.64% and by 1.34% respectively.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.18%, while Commerzbank fell by 0.18%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.74% and by 1.06% respectively, with Credit Agricole gaining 0.77%.

The French auto sector also found support with Stellantis NV and Renault seeing gains of 2.64% and 2.59% respectively.

Air France-KLM slipped by 0.05%, however, while Airbus rallied by 3.77%.

On the VIX Index

It was a back into the green for the VIX.

In the week ending 30th July, the VIX rose by 6.05%. Partially reversing a 6.78% fall from the previous week, the VIX ended the week at 18.24.

3-days in the green from 5 sessions, which included a 10.13% jump on Tuesday delivered the upside.

For the week, the NASDAQ fell by 1.11%, with the Dow and the S&P500 ending the week down by 0.36% and by 0.37% respectively.

VIX 310721 Daily Chart

The Week Ahead

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

Private sector PMIs for Italy and Spain will be in focus. Finalized numbers for France, Germany, and the Eurozone are also due out.

Any revisions to prelim numbers and Italy’s PMIs will likely draw the greatest interest.

Early in the week, Eurozone and German retail sales figures will also be key, however. The ECB is looking for a consumption driven economic recovery.

Later in the week, the ECB Economic Bulletin and member state trade data will also be in focus.

From the U.S, ISM Manufacturing and Non-Manufacturing PMIs will be key through the 1st half of the week.

On the labor market front, however, ADP nonfarm employment change, weekly jobless claims, and nonfarm payrolls will also influence.

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

European Equities: Economic Data from Germany and the U.S in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a bullish day for the majors on Wednesday.

The CAC40 rallied by 1.18%, with the DAX30 and the EuroStoxx600 ending the day up by 0.33% and by 0.66% respectively.

Following the early in the week sell-off across the Chinese markets, the Hang Seng and CSI300 steadied mid-week, providing support.

Corporate earnings were also in focus, with better-than-expected numbers delivering support to the majors on the day. From France, Capgemini (+3.77%) and Kering (+3.64%) delivered the upside for the CAC40.

The Stats

German consumer sentiment was in focus going into the European open.

For August, the GfK Consumer Confidence Index held steady at -0.30. Economists had forecast a decline to -2.0.

According to the GfK survey,

  • Following a 10-year high, economic expectations moderated in July, falling by 3.8 points to 54.6.
  • Income expectations slipped by 5.1 points to 29 points, which was still up 10 points year-on-year.
  • By contrast, the propensity to buy was on the rise, increasing by 1.4 points to 14.8. In spite of the rise, consumption propensity was still down by almost 28 points year-on-year.

From the U.S

From the U.S, trade data was in focus late in the European session. The numbers had a muted impact on the European majors, however.

There was caution ahead of the post-European close FOMC interest rate decision and press conference.

After the European close, the FED avoided delivering any market shocks.

In line with market expectations, the FED left monetary policy unchanged, while acknowledging that the economic recovery was progressing.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. BMW and Daimler fell by 0.08% and by 0.28% respectively. Continental and Volkswagen avoided the red, however, rising by 0.34% and by 0.60% respectively.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank ended the day down by 0.85% and by 0.35% respectively.

From the CAC, it was also a bearish day for the banks. Soc Gen fell by 0.41%, with BNP Paribas and Credit Agricole declining by 0.16% and by 0.22% respectively.

It was a bullish day for the French auto sector, however. Stellantis NV rose by 0.85%, with Renault ending the day up by 4.54%.

Air France-KLM and Airbus SE also found strong support, rising by 1.37% and by 2.65% respectively.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking the first decline of the week.

Partially reversing a 10.13% jump from Tuesday, the VIX fell by 5.42% to end the day at 18.31.

The NASDAQ rose by 0.70%, while the Dow and the S&P500 ended the day down by 0.36% and by 0.02% respectively.

VIX 290721 Daily Chart

The Day Ahead

It’s a busier day ahead on the economic calendar. German unemployment and inflation figures are due out later today.

We can expect both sets of numbers to influence ahead of the U.S session.

From the U.S, weekly jobless claim and 2nd quarter GDP numbers will also influence.

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

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 28 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Economic Data and Sentiment Towards the FED to Influence

Economic Calendar

Tuesday, 27th July

France Jobseekers Total JUN

Wednesday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a bearish day for the majors on Tuesday.

The CAC40 fell by 0.71%, with the DAX30 and the EuroStoxx600 ending the day down by 0.64% and by 0.54% respectively.

There were no major stats from the Eurozone to provide the majors with direction in the day.

Market sentiment towards the rout across the Chinese markets weighed on the majors going into the open.

Providing some support late in the day was the IMF’s latest economic growth forecasts. For 2022, the IMF revised up its growth forecasts by 0.5 percentage points to 5.6% for advanced economies.

Economic data from the U.S was also market positive. U.S consumer confidence took an unexpected jump in July, aligned with the IMF’s outlook towards the U.S economy.

The Stats

Economic data was limited to jobseeker numbers from France, which had a muted impact on the European majors.

In June, the total number of job seekers declined from 3,490.1k to 3,417.6k. Economists had forecast a decline to 3,430.1k.

From the U.S

Durable goods orders and consumer confidence figures were in focus late in the session.

In June, durable goods orders increased by 0.8%, following a 3.2% rise in May. Durable goods orders ex transportation increased by 0.3%, following a 0.5% rise in May. Economists had forecast increases of 1.9% and 0.9% respectively.

Consumer confidence strengthened in July, with the CB Consumer Confidence Index rising from 128.9 to 129.1. Economists had forecast a decline to 126.0.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. BMW and Volkswagen slid by 1.73% and by 1.86% respectively, with Continental and Daimler falling by 1.54% and by 1.52% respectively.

It was also a bearish day for the banks. Deutsche Bank declined by 0.52%, with Commerzbank ending the day down by 2.70%.

From the CAC, it was a bearish day for the banks. Credit Agricole fell by 1.09%, with BNP Paribas and Soc Gen declining by 0.91% and by 0.98% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day with modest losses of 0.20% and 0.13% respectively.

Air France-KLM slipped by 0.07%, while Airbus SE rose by 0.29%.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Tuesday.

Following a 2.21 gain on Monday, the VIX jumped by 10.13% to end the day at 19.36.

The NASDAQ fell by 1.21%, with the Dow and the S&P500 ending the day down by 0.24% and by 0.47% respectively.

VIX 280721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. German consumer confidence will be in focus going into the European session.

Economists have forecast for the GfK Consumer Confidence Index to fall from -0.3 to -2.0 for August.

From the U.S, there are no material stats due out to provide the majors with direction. While there are no stats to consider, the markets will be looking ahead to the FED interest rate decision and press conference. The European majors will need to wait until Thursday’s session, however, to respond.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 87 points.

For a look at all of today’s economic events, check out our economic calendar.

 

European Equities: Futures Point to another Shaky Start for the Markets

Economic Calendar

Tuesday, 27th July

France Jobseekers Total JUN

Wednesday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a mixed start to the week for the majors on Monday.

The CAC40 rose by 0.15%, while the DAX30 and the EuroStoxx600 ended the day down by 0.32% and by 0.08% respectively.

Economic data from Germany disappointed on Monday, pegging the DAX30 back at the start of the week,

In spite of the threat of the Delta variant on the economic recovery, the losses for the DAX30 and EuroStoxx600 were modest.

Market optimism towards a pickup in economic activity, supported by last week’s private sector PMIs and a dovish ECB remained key drivers.

The Stats

Business sentiment figures from Germany were in focus early in the European session.

In July, the Ifo Business Climate Index fell from 103.7 to 101.2, versus a forecasted decline to 103.6.

According to the July survey,

  • Sentiment towards current conditions improved, with the current conditions sub-index rising from 99.7 to 100.4.
  • Concerns over the outlook weighed, however, with the business climate sub-index falling from 101.7 to 100.8.

At sector level,

  • The index in manufacturing fell due to a marked decline in optimism in companies’ expectations. It was a 4th consecutive monthly decline.
  • By contrast manufacturer assessment of current conditions hit the highest level since Aug-2018.
  • There was a similar trend across the services sector, with the business climate sub-index weakening, while firms were more satisfied with their ongoing business.

From the U.S

New home sales figures for June were in focus that had a muted impact on the European majors.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Daimler rose by 0.03% to buck the trend. Continental slid by 1.50%, however, with BMW and Volkswagen falling by 0.40% and by 0.89% respectively.

It was a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 0.66% and by 1.41% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rallied by 2.25%, with Credit Agricole and Soc Gen rising by 1.73% and by 1.78% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 0.85% and by 1.04% respectively.

Air France-KLM rallied by 2.32%, with Airbus SE rising by 0.45%.

On the VIX Index

A run of 4 consecutive days in the red came to an end for the VIX on Monday.

Partially reversing a 2.77% fall from Friday, the VIX rose by 2.21% to end the day at 17.58.

The NASDAQ eked out a 0.03% gain, with the Dow and the S&P500 both ending the day up by 0.24% respectively.

VIX 270721 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no major stats from the Eurozone to provide the majors with direction.

From the U.S, consumer confidence figures late in the day will provide the majors with direction, however.

Away from the economic calendar, corporate earnings and COVID-19 news updates will remain areas of focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 130 points, with the DAX down by 71 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Business Sentiment and COVID-19 in Focus

Economic Calendar

Monday, 26th July

German Ifo Expectations JUL

Tuesday, 27th July

France Jobseekers Total JUN

Wednensday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate QoQ Flash Q2

German GDP Growth Rate YoY Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate QoQ Flash Q2

Spanish GDP Growth Rate YoY Flash Q2

Italian GDP Growth Rate QoQ Adv Q2

Italian GDP Growth Rate YoY Adv Q2

Eurozone Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2 

The Majors

It was a bullish end to the week for the majors on Friday.

The CAC40 rose by 1.35%, with the DAX30 and the EuroStoxx600 ending the day up by 1.00% and by 1.09% respectively.

A further pickup in private sector activity across the Eurozone supported the majors at the end of the week.

With Monday’s sell-off a distant memory, optimism towards the earnings season and sentiment towards ECB monetary policy also delivered yet more upside.

The gains came in spite of disappointing PMI numbers from France, the UK, and from the U.S.

The Stats

French, German, and Eurozone private sector PMIs were in focus on Friday.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

From the U.S

Prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler rallied by 5.00% to lead the way, supported by a broker upgrade to buy. Volkswagen and Continental rose by 2.66% and by 2.35% respectively, with BMW gaining 2.06%.

It was a mixed day for the banks, however. Deutsche Bank rose by 1.05%, while Commerzbank ended the day down by 0.04%.

From the CAC, it was a bullish day for the banks. Soc Gen rallied by 1.83%, with BNP Paribas and Credit Agricole rising by 1.18% and by 1.09% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 1.04% and by 0.97% respectively.

Air France-KLM slipped by 0.28%, while Airbus SE rose by 1.81%.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday.

Following a 1.23 decline on Thursday, the VIX fell by 2.77% to end the day at 17.20.

The Dow rose by 0.68%, with the NASDAQ and the S&P500 ending the day up by 1.04% and by 1.01% respectively.

VIX 260721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Business sentiment figures from Germany are due out early in the European session,

Expect the headline Ifo Business Climate Index to have the greatest impact.

From the U.S, housing sector numbers, due out late in the session, should have a muted impact on the European majors.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 1 point.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Week in Review – 23/07/21

The Majors

It was a choppy week for the majors in the week ending 23rd July.

The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.

Concerns over the impact of the Delta strain on the economic recovery had sent the majors into the deep red on Monday.

Dip-buying, optimism towards corporate earnings, and ECB assurances supported a recovery, however.

Economic data in the week delivered mixed results, however, limiting the upside for the majors later in the week.

Key was a pickup in private sector activity in Germany…

The Stats

Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.

It was a mixed set of numbers, however.

Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.

More significant, however, were the prelim PMI numbers for July.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately supporting the European boerses on the day.

From the U.S

Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

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

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Daimler rallied by 4.70% to lead the way, with Continental up 1.78%. BMW and Volkswagen saw more modest gains of 0.46% and 0.48% respectively.

It was a mixed week for the banking sector, however. Deutsche Bank rallied by 4.35%, while Commerzbank fell by 0.55%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.38% and by 1.33% respectively, with Credit Agricole gaining 1.92%.

The French auto sector also found support with Stellantis NV and Renault seeing modest gains of 0.55% and 0.81% respectively.

Air France-KLM and Airbus ended the week up by 0.41% and by 0.78% respectively.

On the VIX Index

It was a back into the red for the VIX, which saw red for the 3rd week in 5 weeks.

In the week ending 23rd July, the VIX fell by 6.78%. Partially reversing a 14.03% gain from the previous week, the VIX ended the week at 17.2.

4-days in the red from 5 sessions, which included a 12.31% slide on Tuesday and a 9.22% decline on Wednesday delivered the downside. The VIX had jumped by 21.95% at the start of the week.

For the week, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.08% and by 1.96% respectively.

VIX 240721 Weekly Chart

The Week Ahead

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

Early in the week, the German economy will be under scrutiny.

Business and consumer sentiment figures will be in focus.

Expect plenty of interest in the numbers that are due out on Monday and Wednesday.

On Thursday, unemployment numbers from Germany will also draw attention ahead of prelim GDP numbers on Friday.

GDP figures for France, Germany, and the Eurozone will be in focus at the end of the week.

Other stats in the week include member state and Eurozone inflation figures. Following Lagarde’s guidance on inflation, expect any spike in inflation to influence.

From the U.S, it’s also a busy week ahead.

On Tuesday, core durable goods and consumer confidence will be in focus.

The focus will then shift to the weekly jobless claims and 2nd quarter GDP numbers on Thursday.

Personal spending and consumer sentiment numbers wrap things up on Friday.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

European Equities: Private Sector PMIs for July in the Spotlight

Economic Calendar

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was relatively bullish day for the majors on Thursday.

The CAC40 rose by 0.26%, with the DAX30 and the EuroStoxx600 ending the day up by 0.60% and by 0.56% respectively.

A busier economic calendar and the ECB monetary policy decision and press conference were key drivers on the day.

Away from the economic calendar, COVID-19, the spike in new cases, and possible impact on the global economic recovery remained a drag, however.

The Stats

consumer confidence figures for the Eurozone were in focus on the day.

In June, the Eurozone’s Consumer Confidence Index took an unexpected fall from -3.3 to -4.4. Economists had forecast an increase to -2.6.

While the stats were of influence, the ECB monetary policy decision and the press conference were the key drivers.

In line with market expectations, the ECB left monetary policy unchanged.

From the press conference, ECB President Lagarde looked to deliver further assurances that there would be no rate hikes until inflation reaches its 2% target.

Lagarde comment on inflation was categoric. “Our rate policy would be lifted only if the evidence is sufficiently clear, sufficiently persistent, sufficiently lasting and we have the degree of confidence that our inflation will reach 2% on a durable basis.”

With the Delta variant impacting many economies, the ECB President also highlighted the downside risks stemming from the pandemic.

From the U.S

Jobless claims figures were in focus. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Daimler rose by 0.53% to buck the trend on the day. Volkswagen and Continental fell 1.37% and by 1.44% respectively. BMW saw a more modest 0.79% decline,

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank ended the day down by 0.55% and by 1.02% respectively.

From the CAC, it was a bearish day for the banks. Soc Gen fell by 0.67%, with BNP Paribas and Credit Agricole declining by 0.55% and by 0.46% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 0.57% and by 1.58% respectively.

Air France-KLM rose by a modest 0.41%, while Airbus SE fell by 1.01%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Thursday, reversing a run of 3 consecutive days in the green.

Following a 9.22% decline on Wednesday, the VIX fell by 1.23% to end the day at 17.69.

The NASDAQ rose by 0.36%, with the Dow and the S&P500 ending the day up by 0.07% and by 0.20% respectively.

VIX 230721 Daily Chart

The Day Ahead

It’s a busy day ahead on the economic calendar. Prelim private sector PMIs for France, Germany, and the Eurozone will be in focus. Expect plenty of interest in the numbers.

The markets will be looking for any economic speedbumps that would test support for the majors.

From the U.S, private sector PMIs are also due out. Expect the services PMI to have the greatest influence on the majors later in the session.

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

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 49 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data and the ECB in the Spotlight…

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was particularly bullish day for the majors on Wednesday, following Tuesday’s more modest gains.

The CAC40 rallied by 1.85%, with the DAX30 and the EuroStoxx600 ending the day up by 1.36% and by 1.65% respectively.

A shift in focus towards corporate earnings provided support, with the upside coming in spite of continued concerns over the Delta variant.

Market expectation of strong earnings and also a dovish ECB was the key combination for the majors mid-week.

There were no major stats to materially dent the recovery from Monday’s losses.

Following Wednesday’s rally, the CAC40 moved into positive territory for the current week, while the DAX30 and the EuroStoxx600 remained in the red.

The Stats

It’s been a quiet start to the week on the economic calendar. Following a wholesale inflation figures from Germany on Tuesday, industrial sales figures from Italy were in focus.

Industrial Sales

In May, industrial sales decreased by 1.0%, partially reversing a 3.3% jump from April. Year-on-year, production was up by 40.2% versus a forecasted 45% increase. In April, production had been up by 105.1%.

According to iStat.it,

  • Industrial turnover fell by 1.9% in the domestic market, while rising by 0.7% in the non-domestic one.
  • The manufacturing sector saw industrial turnover contract by 1.4%.
  • In the 3-months to May 2021, total industrial production turnover levels increased by 4.7% when compared with the previous 3-month period.
  • Turnover rose by 5.4% in the domestic market and by 3.2% in the non-domestic market.
  • Year-on-year, turnover in the domestic market was up 41.0% and up by 38.6% in the non-domestic one.

From the U.S

There were no major stats to provide the majors with direction later in the European session.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. Volkswagen and Continental rallied by 2.43% and by 2.86% respectively. BMW and Daimler saw more modest gains of 1.08% and by 0.68% respectively.

It was a particularly bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 4.33% and by 2.65% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 3.15%, with Soc Gen and Credit Agricole rallying by 3.29% and 3.21% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 3.43% and by 4.46% respectively.

Air France-KLM rose by 2.92%, with Airbus SE rallying by 4.38%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Wednesday.

Following a 12.31% slide on Tuesday, the VIX fell by 9.22% to end the day at 17.91.

The NASDAQ rose by 0.92%, with the Dow and the S&P500 ending the day up by 0.83% and by 0.82% respectively.

VIX 220721 Daily Chart

The Day Ahead

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

Early in the European session, business confidence figures for the Eurozone will be in focus. While we expect the numbers to provide direction, the markets will be looking ahead to the ECB policy decision and press conference.

The ECB’s economic outlook and forward guidance on policy will be key. Following the ECB’s revision to its price stability objective, we can also expect plenty of Q&A on the new 2% objective.

After the ECB press conference, consumer confidence figures for the Eurozone will also influence.

From the U.S, jobless claims figures will also draw interest late in the European session. Market reaction may be delayed, however, with the release of the stats coinciding with the ECB press conference.

Away from the economic calendar, corporate earnings and COVID-19 news will also draw attention.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Italian Industrial Production Figures in Focus

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was relatively bullish day for the majors on Tuesday.

The CAC40 rose by 0.81%, with the DAX30 and the EuroStoxx600 ending the day up by 0.55 and by 0.52% respectively.

A quiet day on the economic calendar allowed investors to buy the dip following Monday’s rout.

The upside was modest, however, with concerns over the economic outlook pegging the majors back on the day.

The Stats

Wholesale inflation figures for Germany were in focus going into the European open.

In June, Germany’s annual wholesale rate of inflation accelerated from 7.2% to 8.5%. Economists had forecast a pick up to 8.3%.

Month-on-month, the producer price index rose by 1.3% following a 1.5% increase in May. Economists had forecast a 1.0% rise.

From the U.S

Housing sector figures for June were in focus that had a muted impact on the European majors.

In June, building permits fell by 5.1% to 1.598m, while housing starts rose by 6.3% to 1.643m.

Housing starts had risen by 2.1% in May, with building permits having fallen by 2.9%.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Tuesday. Volkswagen and Daimler rose by 1.80% and by 1.52% respectively. BMW and Continental saw more modest gains of 1.15% and by 1.21% respectively.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 1.63% and by 1.07% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.89%, with Soc Gen and Credit Agricole gaining 1.43% and 1.50% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 0.25% and by 0.80% respectively.

Air France-KLM rose by a modest 0.34%, with Airbus SE rallying by 2.34%.

On the VIX Index

It was back into the red for the VIX on Tuesday, ending a run of 3 consecutive days in the green.

Partially reversing a 21.95% jump from Monday, the VIX fell by 12.31% to end the day at 19.73.

The Dow rose by 1.62%, with the NASDAQ and the S&P500 ending the day up by 1.57% and by 1.52% respectively.

VIX 210721 Daily Chart

The Day Ahead

It’s another quiet day ahead on the economic calendar, with no major stats due out of the Eurozone.

The lack of stats will give industrial production figures from Italy greater influence early in the European session.

From the U.S, there are no major stats to provide direction, however, leaving the majors to take direction from the U.S markets later in the session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 51 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Wholesale Inflation in Focus Following the Monday Rout

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was particularly bearish start to the week for the majors on Monday.

The EuroStoxx600 fell by 2.30%, with the DAX30 and the CAC40 ending the day down by 2.62% and by 2.54% respectively.

There were no major stats to provide the majors with direction, leaving the markets to respond to the fresh spike in new COVID-19 cases.

While Europe and the U.S remain open for business, low vaccination rates across other key economies and rising cases have led to a reintroduction of containment measures.

These measures have raised concerns over the pace of the economic recovery. Ahead of the latest spike, the markets had come under pressure after a string of disappointing numbers from Germany and China in particular.

All of this has been coupled with a continued pickup in inflationary pressures, another negative for the majors.

The Stats

There were no major stats from the Eurozone to provide the majors with direction at the start of the week.

From the U.S

There were also no stats from the U.S to guide the European majors late in the European session.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector on Monday. Continental slid by 3.08% to lead the way down, with BMW and Daimler falling by 2.95% and by 2.96% respectively. Volkswagen ended the day with a 2.55% loss.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank ended the day down by 2.05% and by 3.17% respectively.

From the CAC, it was a particularly bearish day for the banks. Soc Gen and BNP Paribas slid by 4.58% and by 4.19% respectively, with Credit Agricole falling by 3.09%.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 3.60% and by 3.67% respectively.

Air France-KLM declined by 2.89%, with Airbus SE tumbling by 6.38%.

On the VIX Index

It was a 3rd consecutive day in the green for the VIX on Monday, marking a 4th gain in 7-sessions.

Following an 8.47% increase from Friday, the VIX jumped by 21.95% to end the day at 22.50.

The Dow slid by 2.09%, with the NASDAQ and the S&P500 ending the day down by 1.06% and by 1.59% respectively.

VIX 200721 Daily Chart

The Day Ahead

It’s a quiet day ahead on the economic calendar. German wholesale inflation figures for June are due out ahead of the European open.

With market sensitivity to inflationary pressures unlikely to abate any time soon, expect the numbers to influence.

Later in the day, economic data from the U.S includes housing sector numbers that should have a muted impact on the majors.

Away from the economic calendar, COVID-19 will continue to be an area of focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 69 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Quiet Economic Calendar Leaves COVID-19 in Focus, a Market Negative

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was bearish end to the week for the majors on Friday.

The EuroStoxx600 fell by 0.32%, with the DAX30 and the CAC40 ending the day down by 0.57 and by 0.51% respectively.

Following disappointing economic data from China on Thursday, the stats were no better on Friday.

Data for the Eurozone disappointed, with economic data from the U.S sending mixed results.

Rising delta variant cases globally and the need to reintroduce restrictions in some geographies weighed on demand for riskier assets.

The Stats

Finalized inflation figures and trade data for the Eurozone were in focus through the early part of the European session.

Trade

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

According to Eurostat,

  • Exports to the rest of the world increased by 31.9% to €188.2bn year-on-year.
  • Imports from the rest of the world jumped by 35.2% to €180.7bn, year-on-year.
  • Intra-euro areas trade rose by 45.4% to €181.5bn when compared with May 2020.
  • When compared with January-May 2020, euro area exports climbed by 13.3% to €957.9bn in the period January-May 2021.
  • Imports rose by 12.7% to €878.2bn in January-May 2021, when compared with the same period in 2020.
  • As a result, the trade surplus widened from €66.1bn to €79.7bn in the period January to May 2021, when compared with the same period in 2020.
  • Intra-euro area trade increased by 20.5% to €867.6bn in January-May 2021 compared with the same period in 2020.

Inflation

In June, the Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

According to Eurostat,

  • A year earlier, the annual rate of inflation had stood at just 0.3%.
  • Portugal (-0.6%), Malta (+0.2%), and Greece (+0.6%) registered the lowest annual rates of inflation.
  • By contrast, Estonia (+3.7%) recorded the highest annual rate of inflation.
  • In June, the highest contribution to inflation came from energy prices (+1.16 percentage points).
  • Non-energy industrial goods (+0.31 pp), services (+0.28 pp), and food, alcohol, & tobacco (+0.15 pp) also contributed.

From the U.S

Retail sales and consumer sentiment figures were the main areas of focus.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8, however. Economists had forecast an increase to 86.0.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Friday. Volkswagen and Continental fell by 1.47% and by 1.03% respectively. BMW and Daimler saw heavier losses, however, sliding by 2.69% and by 2.14% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank ended the day down by 2.32% and by 2.21% respectively.

From the CAC, it was a bearish day for the banks. Soc Gen slid by 2.46%, with BNP Paribas and Credit Agricole falling 1.66% and by 0.97% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 2.01% and by 1.18% respectively.

Air France-KLM and Airbus SE bucked the broader trend, however, rising by 2.82% and by 0.22% respectively.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Friday, marking a 3rd gain in 6-sessions.

Following a 4.16% increase from Thursday, the VIX rose by 8.47% to end the day at 18.45.

The S&P500 fell by 0.75%, with the NASDAQ and the Dow ended the day down by 0.80% and by 0.86% respectively.

VIX 190721 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

With no major stats from the U.S to consider, COVID-19 news updates and central bank chatter will remain in focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 197 points, with the DAX down by 105 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Week in Review – 16/07/21

The Majors

It was a bearish week for the majors in the week ending 16th July.

The CAC40 fell by 1.06%, with the DAX30 and the EuroStoxx600 ending the week down by 0.94% and by 0.64% respectively.

Concerns over the resilience of the economic recovery and the upward trend in consumer prices continued to weigh on the majors.

Economic data from China that included 2nd quarter GDP numbers added to the market angst late in the week.

Year-on-year, the Chinese economy expanded by 7.9%, which was down from 18.3% in the 1st quarter. Quarter-on-quarter, the economy expanded by 1.3%, which was up from 0.6% growth in the 1st quarter, however.

With concerns over the economic recovery weighing, a sharp upward trend in new COVID-19 cases also added pressure on the majors.

Economic data from the U.S and assurances of unwavering monetary policy support delivered some comfort in the week, however.

FED Chair Powell testimony and a shift in the ECB’s policy on price stability suggested an extended period of policy status quo.

The Stats

Industrial production and trade data for the Eurozone were in focus along with finalized inflation figures for June.

For the Eurozone, industrial production fell by 1.0%, reversing a 0.6% rise from April.

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

Following a shift in the ECB’s policy on price stability, however, the inflation figures had limited impact.

The Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

From the U.S

Inflation figures weighed on riskier assets early in the week.

The annual rate of inflation accelerated from 5.0% to 5.4% in June, with the core annual rate of inflation picking up from 3.8% to 4.5%.

Wholesale inflationary pressures were also on the rise, with the producer price index increasing by 1.0% in June. In May, the index had risen by 0.7%.

In the 2nd half of the week, jobless claims, retail sales, and consumer sentiment were in focus.

It was a mixed set of numbers for the Dollar.

In the week ending 9th July, initial jobless claims fell from 386k to 360k.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

While the jobless claims and retail sales figures were positive, consumer sentiment waned in July.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8. Economists had forecast a rise to 86.0.

Manufacturing sector data from Philly and NY State, industrial production, and business inventories were also out but had a muted impact on the markets.

On the monetary policy front, FED Chair Powell delivered 2 days of testimony to lawmakers. Powell talked of the FED’s willingness to let inflation run hotter in order to avoid the mistake of tightening policy too soon. The FED Chair’s assurances had limited impact, however.

The Market Movers

From the DAX, it was a bearish week for the auto sector. BMW and Volkswagen slid by 2.71% and by 2.56% respectively, with Continental falling by 2.30%. Daimler ended the week down by a more modest 1.57%.

It was also a bearish week for the banking sector. Deutsche Bank and Commerzbank saw losses of 3.98% and 4.03% respectively.

From the CAC, it was a bearish week for the banks. BNP Paribas fell by 2.06%, with Soc Gen and Credit Agricole sliding by 2.50% and by 2.88% respectively.

The French auto sector also struggled with Stellantis NV and Renault seeing particularly heavy losses of 4.85% and 7.55% respectively.

Air France-KLM and Airbus ended the week down by 3.96% and by 1.88% respectively.

On the VIX Index

It was a second consecutive weekly gain for the VIX. In the week ending 16th July, the VIX rose by 14.03%. Following a 7.37% gain from the previous week, the VIX ended the week at 18.45.

3-days in the green from 5 sessions, which included a 8.47% jump on Friday delivered the upside in the week.

For the week, the NASDAQ slid by 1.87%, with the Dow and the S&P500 ending the week down by 0.52% and by 0.97% respectively.

VIX 170721 Weekly Chart

The Week Ahead

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

Late in the week, business and consumer confidence figures will be in focus. With the ECB looking for consumption to fuel the economic recovery, the numbers will influence.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will also be in focus.

The markets will be looking for any economic speed bumps following disappointing stats from Germany recently.

On the monetary policy front, the ECB is also in action on Thursday. With the policy revamp and some uncertainty over the economic outlook, it should be an interesting press conference…

From the U.S, jobless claims will draw plenty of attention on Friday.

At the end of the week, prelim private sector PMIs for July will also be in focus.

Expect the services PMI and the initial jobless claim figure to be the key numbers of the week.

Away from the economic calendar, corporate earnings will draw some attention.

Big names from the U.S include Netflix Inc. (Tues), Coca-Cola Co. (Wed), and Twitter Inc. (Thur).

To add to the plate, COVID-19 news will also need monitoring in the week.

European Equities: U.S Economic Data and COVID-19 in Focus

Economic Calendar

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Inflation YoY Final JUN

The Majors

It was bearish day the European majors on Thursday, following modest moves on Wednesday.

The DAX30 fell by 1.01%, with the EuroStoxx600 and the CAC40 ending the day down by 0.95 and by 0.99% respectively.

Setting the tone ahead of the European open were stats from China, with 2nd quarter GDP numbers in focus.

Quarter-on-quarter, the Chinese economy expanded by 1.3%, which came up short of a forecasted 1.4%. In the 1st quarter, the economy had expanded by 0.6%.

Year-on-year, the economy expanded by 7.9%, however, which was softer than 18.3% growth in the 1st quarter. Economists had forecast growth of 8.3%.

The weaker than expected numbers raised further concerns over the resilience of the global economic recovery, leading to a pullback in the majors going into the open.

Better than expected jobless claim figures from the U.S failed to provide support, with manufacturing sector activity in Philly seeing slower growth.

A continued rise in new COVID-19 cases globally added to the market angst on the day.

The Stats

Finalized inflation figures from Italy were in focus through the early part of the European session.

Italian Consumer Prices

Consumer prices rose by 0.1% in June, according to finalized figures, which was in line with prelim numbers. In May, consumer prices had stalled, month-on-month.

Italy’s annual rate of inflation held steady at 1.3%, which was also in line with prelim figures.

According to istat.it,

  • The stable annual rate of inflation was attributed to regulated and non-regulated energy prices.
  • Regulated energy prices accelerated from +16.8% to +16.9%, with non-regulated ones from +12.6% to +12.8%.
  • Prices for processed food, including alcohol, saw prices fall at a more modest rate. In June prices fell by 0.4%, year-on-year, compared with a 1.1% drop in May.
  • There was a pickup in services related to recreation, which went from null to +1.0%.

From the U.S

It was a busier day on the economic data front, with jobless claim figures back in focus.

June industrial production and July manufacturing sector data were also in focus though had a relatively muted impact on the majors.

In the week ending 9th July, initial jobless claims declined from 386k to 360k.

The Philly FED Manufacturing PMI fell from 30.7 to 21.9, while the NY Empire State Manufacturing Index rose from 17.4 to 43.0.

Industrial production rose by 0.4%, following a 0.7% increase in May. Economists had forecast a 0.6% rise.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen and Continental slid by 2.11% and by 2.03% respectively. BMW and Daimler saw more modest losses of 1.15% and 0.23% respectively, however.

It was a mixed day for the banks. Deutsche Bank declined by 0.42%, while Commerzbank rose by 0.36%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Credit Agricole saw losses of 0.82% and 0.79% respectively, while Soc Gen rose by 0.34%.

It was a bearish day for the French auto sector, however. Stellantis NV and Renault ended the day down by 1.43% and by 2.19% respectively.

Air France-KLM and Airbus SE also saw red, falling by 0.26% and by 0.52% respectively.

On the VIX Index

It was back into the green for the VIX on Thursday, marking a 2nd gain in 5-sessions.

Partially reversing a 4.61% loss from Wednesday, the VIX rose by 4.16% to end the day at 17.01.

The Dow rose by 0.15%, while the NASDAQ and the S&P500 ended the day down by 0.70% and by 0.33% respectively.

VIX 160721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures and trade data for the Eurozone will be in focus later today. We don’t expect any lasting impact from the inflation numbers on the majors.

Trade data for the Eurozone will provide some direction, however.

From the U.S, retail sales and consumer sentiment figures will influence later in the day, however.

Away from the economic calendar, expect news updates on the spread of the Delta variant to also draw interest.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 39 points.

For a look at all of today’s economic events, check out our economic calendar.

The Stock Market Is At An Important Inflection Point

Within my latest piece discussing the merits of deflation, I briefly touched on how several leading economic indicators appear to be signally growth may have peaked for the time being. Whilst these business cycle and growth metrics are not necessarily useful on their own, when the price action of equities appear to be confirming the macro message; it may be time to pay attention. Such at time appears imminent.

Looking at two of my preferred leading macro indicators of the business cycle, the ERCI weekly leading index and global credit impulse, both are signaling peak growth may be in the rear view mirror.

Source:    Economic Cycle Research Institute

Source: Economic Cycle Research Institute

Source:    Alfonso Peccatiello - The Macro Compass

Source: Alfonso Peccatiello – The Macro Compass

Confirming this message are the most economically sensitive sectors of the stock market. Retail, transports, metals/mining, materials and the industrials sectors have all underperformed these last few months relative to the S&P 500. When the markets goes on the make a new high and all economically sensitive sectors such as these do not confirm the new high, it is a clear signal the new highs are not being supported by economic fundamentals.

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Indeed, these recent highs have seen a significant rotation out of the reflation and value type sectors back into the growth darlings. Market breadth, another excellent measure of market internals, has too not confirmed the recent highs. We are seeing significant bearish divergences in almost all measures of breadth, and the recent rally is almost solely being driven by the likes of Apple and Amazon.

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In the past, periods of poor breadth amid new highs in the major indices have generally lead to at least some form of correction or consolidation. It is perhaps unsurprising then to see that small-caps and emerging markets have gone nowhere over the past six months (in a similar manner to the economically sensitive sectors illustrated above) whilst the broad market has continued to march higher.

Capture.PNG

The market is now almost entirely being driven by a rotation out of cyclical sectors and back into tech, FAANG and defensive stocks.

Capture.PNG

Such periods of tech outperformance coinciding with the market cap weighted S&P 500 outperforming the equal weighted S&P 500 have been reminiscent of market tops in recent months.

Capture.PNG

Continuing this theme of non-confirmation are investor risk-appetites. Firstly, the pro-cyclical currency pair of AUD/JPY and AUD/USD both appear to be rolling over. The strength of the Aussie dollar is generally a good proxy for risk-on and risk-off type environments.

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Extending this out to a longer-term perspective, another chart I referenced within my deflation article was the long-term AUD/JPY FX pair, which looks to have broken out of its bearish rising wedge pattern at the top of its near decade trading range.

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Continuing with risk appetites via the VIX, which is effectively investors expectations of volatility over the coming month, the VIX has not made new lows over recent months as the market has gone on to make new highs. Such divergences between the two have typically preceded periods of market turmoil in the past.

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Turning now to the technicals, they too are bear a similar message. On the weekly chart, we are seeing slight negative divergences in RSI and money flow, accompanied by a 9-13-9 weekly DeMark sequential sell signal.

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What’s more, we are amidst a seasonally weak period of stocks, almost indicative of what I have detailed above. Clearly, we can see on many different measures that stocks are seemingly at risk of some form of correction, or at the very least, a period of consolidation.

SPY Seasonality.jpeg

In isolation, these indicators and measures are not of much use, but, in the case where they align to tell a similar story at once, it is important to take heed. I personally tend to favor trades and investment opportunities whereby fundamentals, technicals, sentiment and macro all align. For the most part, now appears to potentially be such a time.

However, I shall stress I am by no means predicting a significant risk-off event is imminent. For fear of being labelled a “perma bear”, let met be clear I am merely presenting a number of important measures investors should take heed of as part of their own due diligence and risk management. The clear takeaway from what I have presented above is that the risk-reward set-up for equities is not overly favorable at present. Nevertheless, there does remain pockets of value and opportunity still to be found within these markets.

Those who have been readers of my previous writings will be well aware of how I have deemed there to be several decent buying opportunities in the gold and precious metals market of late. At the risk of repeating myself once more, dare I say it but today stands as another such opportunity for investors seeking to deploy capital. In terms of valuations and fundamentals, the gold miners are clear standouts.

Source:    Sprott via Ronnie Stoeferle

Source: Sprott via Ronnie Stoeferle

However, fundamentals in isolation may not necessarily be meaningful if they are already priced in. It does however appear this is not the case. We can see this by comparing the divergence between the gold price and real interest rates. This is an inverse relationship that has historically nearly always held up, and is a key driver of the gold price. Given how real rates remain deeply negative today, it seems only a matter of time before the gold price catches up to real rates. One way to view this is by using TIPs as a proxy for real rates relative to gold.

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Will gold follow real rates? Seasonality suggests it will.

deflation.jpeg

To conclude, the market appears to be running our of gas. I for one would use a potential pull-back as a buying opportunity for several sectors and assets I am bullish on. I love the green-energy trades in uranium, copper and carbon credits, but, given how far these sectors and assets have come in the past year I would love to see further weakness before I begin buying. Again, that does not mean opportunities are not present right now, gold is perhaps the perfect example, and it looks like it may be an excellent time for investors to take profits out of the favored and deploy capital into the unfavored.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data from China and the U.S to Give Direction

Economic Calendar

Thursday, 15th July

Italy Inflation Rate MoM Final JUN

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Core Inflation Final JUN

The Majors

It was another mixed day the European majors on Wednesday, following modest moves on Tuesday.

The EuroStoxx600 fell by 0.08%, while the DAX30 and the CAC40 both ended the day flat.

Economic data from the Eurozone disappointed once more, pegging the majors back mid-week.

While the numbers were disappointing, continued central bank assurances of unwavering support propped up the majors on the day.

The Stats

While inflation was back in focus on Wednesday, industrial production figures for the Eurozone was of greater influence.

Spanish Consumer Prices

Spain’s annual rate of inflation held steady at 2.7% in June, which was up from a prelim 2.6%. The harmonized index for consumer prices rose by 2.5%, which was up from a prelim and May 2.4%.

Eurozone Industrial Production

In May, industrial production fell by 1.0%, reversing a 0.6% increase from April. Economists had forecast a 0.2% decline.

According to Eurostat,

Production of non-durable consumer goods fell 2.3%, energy by 1.9%, and capital goods by 1.6%.

While the production of intermediate goods slipped by 0.2%, durable consumer goods production rose by 1.6%.

Greece (-4.7%) and Ireland (-4.6%) recorded the largest monthly declines in production. By contrast, Lithuania recorded a 7.7% jump in production to lead the way.

Compared with May 2020, industrial production was up 20.5%. In April, production had been up by 39.4%. Economists had forecast a 22.2% increase.

From the U.S

Wholesale inflation was in focus following the sharp pickup in consumer price inflation from the day prior.

In June, the producer price index rose by 1.0%, following a 0.7% increase in May.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Volkswagen slipped by 0.05% to buck the trend on the day. BMW and Daimler rose by 0.67% and by 0.59% respectively, with Continental ending the day up by 1.58%.

It was a mixed day for the banks. Deutsche Bank slipped by 0.10%, while Commerzbank rose by 0.11%.

From the CAC, it was a relatively bullish day for the banks. Credit Agricole and Soc Gen saw gains of 0.60% and 0.45% respectively, with BNP Paribas rising 0.61%.

It was a bearish day for the French auto sector, however. Stellantis NV and Renault ended the day down by 0.20% and by 1.23% respectively.

Air France-KLM slid by a further 2.51%, with Airbus SE falling by 0.23%.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking a 3rd decline in 4-sessions.

Partially reversing a 5.88% gain from Tuesday, the VIX fell by 4.61% to end the day at 16.33.

The NASDAQ slipped by 0.22%, while the Dow and the S&P500 ended the day up by 0.13% and by 0.12% respectively.

VIX 150721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures for Italy will be in focus later today. We don’t expect the numbers to have a material impact on the European majors, however.

From the U.S, weekly jobless claims and Philly FED Manufacturing PMI numbers will draw plenty of attention, however.

Other stats from the U.S include manufacturing numbers for NY State and industrial production figures for June. Barring particularly dire numbers, however, we don’t expect these numbers to have a material impact on the majors.

Following a sharp pickup in inflationary pressures, a marked fall in jobless claims would likely test support for riskier assets.

Ahead of the European open, 2nd quarter GDP numbers, fixed asset investment, industrial production, and retail sales figures from China will set the tone.

Lingering market jitters over the resilience of the global economic recovery will place greater emphasis on the Q2 GDP numbers.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 25 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Eurozone Industrial Production in Focus

Economic Calendar

Wednesday, 14th July

Spain Harmonized Inflation Rate YoY Final JUN

Spain Inflation Rate YoY Final JUN

Eurozone Industrial Production MoM MAY

Thursday, 15th July

Italy Inflation Rate MoM Final JUN

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Inflation Final JUN

The Majors

It was a mixed day the European majors on Tuesday, though the gains and losses were modest by the close.

The EuroStoxx600 rose by 0.03%, while the DAX30 and the CAC40 both ended the day with 0.01% losses.

Central bank commentary provided the majors with support, while U.S inflation figures weighed on riskier assets on the day.

ECB President Lagarde continued to reassure the markets that there would be no jumping the gun on tightening monetary policy.

A sharp pickup in U.S inflationary pressure pegged the European majors back, however.

The Stats

Inflation was in focus on Tuesday, with finalized German and French inflation figures released early in the European session.

German Consumer Prices

In June, the annual rate of inflation softened from 2.5% to 2.3%, which was in line with prelim figures. Month-on-month, consumer prices rose by increased by 0.4%, following a 0.5% increase in May.

According to Destatis,

  • The prices of goods (total) increased by 3.1% between June 2020 and June 2021.
  • Energy prices were up by 9.4%, which was attributed temporary special effects, in particular the CO2 charge introduced at the start of the year.
  • Food prices were up a below-average 1.2% in June, however, compared with June 2020.
  • The prices for services (total) increased by 1.6% in June compared with the same month a year earlier.

French Consumer Prices

The annual rate of inflation picked up from 1.4% to 1.5% in June, which was in line with prelim figures. Month-on-month, French consumer prices increased by 0.2% following a 0.3% rise in May.

According to Insee.Fr,

  • The prices for services rose by just 0.1%, after a 0.3% increase in May.
  • Food prices hit reverse, falling by 0.7% following a 0.5% increase in May.
  • Tobacco prices were stable in the month.
  • Year-on-year, the uptick in consumer prices came from a pickup in prices for manufactured goods and prices for energy.
  • Manufactured goods prices increased by 0.5%, with energy prices up 1.1%. Prices for manufactured goods and energy had risen by 0.1% and by 0.5% respectively in May.

From the U.S

Inflation figures were also in focus late in the European session.

The annual rate of inflation accelerated from 5% to 5.4%, with the core annual rate of inflation picking up from 3.8% to 4.5%.

Month-on-month, consumer prices increased by 0.9%, with core consumer prices also up 0.9%. In May, consumer prices and core consumer prices had risen by 0.6% and by 0.7% respectively.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. Volkswagen slid by 1.60%, with BMW falling by 0.84%. Daimler and Continental ended the day with more modest losses of 0.38% and 0.54% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank fell by 1.53% and by 2.05% respectively.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen declined by 0.41% and by 0.97% respectively, with Credit Agricole falling 1.56%.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 1.44% and 1.76% respectively.

Air France-KLM slid by 2.06%, with Airbus SE falling by 0.86%.

On the VIX Index

It was back into the green for the VIX on Tuesday.

Reversing a 0.06% loss from Monday, the VIX rose by 5.88% to end the day at 17.12.

The Dow slipped by 0.31%, with the NASDAQ and the S&P500 ending the day down 0.38% and by 0.35% respectively.

VIX 140721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures for Spain and Industrial production figures for the Eurozone will be in focus later today.

Expect the Eurozone’s industrial production figures to be key. Weak numbers will test market optimism towards the economic recovery.

From the U.S, there are no material stats due out to provide the majors with direction. The lack of stats will leave corporate earnings in focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 10 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Inflation Figures and Corporate Earnings in Focus

Economic Calendar

Tuesday, 13th July

German Inflation Rate YoY Final JUN

German Inflation Rate MoM Final JUN

French Inflation Rate YoY Final JUN

French Inflation Rate MoM Final JUN

Wednesday, 14th July

Spain Harmonized Inflation Rate YoY Final JUN

Spain Inflation Rate YoY Final JUN

Eurozone Industrial Production MoM MAY

Thursday, 15th July

Italy Inflation Rate MoM Final JUN

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Inflation Final June

The Majors

It was a bullish start to the week for the European majors on Monday.

The CAC40 rose by 0.46%, with the DAX30 and the EuroStoxx600 ending the day up by 0.65% and by 0.69% respectively.

There were no stats to provide the majors with direction on the day, leaving corporate earnings in focus.

While sentiment towards the earnings season provided support, concerns over the spread of the Delta variant pegged the majors back.

Vaccine shortages and low vaccination rates across a large number of countries pressured the majors. There were also reports of China’s Sinovac vaccine having lower efficacy against the Delta variant, which will remain a test.

The Stats

It was a particularly quiet day, with no material stats from the Eurozone.

From the U.S

It was also a quiet day on the U.S economic calendar. There were no stats from the U.S to provide the majors with direction late in the European session.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Volkswagen rallied by 2.72%, with BMW and Daimler ending the day up by 1.32% and by 0.62% respectively. Continental bucked the trend, however, falling by 0.27%.

It was also a mixed day for the banks. Deutsche Bank rose by 0.38%, while Commerzbank slipped by 0.18%.

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen rose by 0.22% and by 0.10% respectively, while Credit Agricole fell by 0.22%.

It was also a mixed day for the French auto sector. Renault ended the day down by 1.45%, while Stellantis NV closed out the day unchanged.

Air France-KLM and Airbus SE saw losses of 1.92% and 0.50% on the day. The likely impact of the Delta variant on travel weighed on travel stocks at the start of the week.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Monday.

Following a 14.84% slide on Friday, the VIX fell by 0.06% to end the day at 16.17.

The NASDAQ rose by 0.21%, with the Dow and the S&P500 ending the day up 0.36% and by 0.35% respectively.

VIX 130721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Finalized June inflation figures for France and Germany will be in focus in the early part of the European session.

Following the ECB’s policy revision, however, the finalized numbers are unlikely to have a material impact on the European majors, barring a marked upward revision.

From the U.S, inflation figures are also due out and will likely have a greater impact on the majors.

Earlier in the day, trade data from China will set the tone going into the European open.

Away from the economic calendar, corporate earnings season kicks off today. U.S banks Goldman Sachs, JPMorgan, and Morgan Stanley are among big names set to release results later today…

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 3 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Quiet Economic Calendar Leaves COVID-19 and Earnings in Focus

Economic Calendar

Tuesday, 13th July

German Inflation Rate YoY Final JUN

German Inflation Rate MoM Final JUN

French Inflation Rate YoY Final JUN

French Inflation Rate MoM Final JUN

Wednesday, 14th July

Spain Harmonized Inflation Rate YoY Final JUN

Spain Inflation Rate YoY Final JUN

Eurozone Industrial Production MoM MAY

Thursday, 15th July

Italy Inflation Rate MoM Final JUN

Friday, 16th July

Eurozone Balance of Trade MAY

Eurozone Inflation Rate Final JUN

The Majors

It was a particularly bullish end to the week for the European majors on Friday.

The CAC40 rallied by 2.07%, with the DAX30 and the EuroStoxx600 ending the day with gains of 1.73% and 1.34% respectively.

Following a string of disappointing stats from Germany in the week, a quiet day on the economic calendar delivered support.

The lack of stats allowed bargain hunters to jump back in following Thursday’s sell-off.

In spite of the rebound, the continued spread of the Delta variant and a more murky economic outlook remain downside risks to the majors.

With the 2nd quarter having come to an end, however, attention will be shifting to corporate earnings, which should be market risk positive.

The Stats

It was a particularly quiet day, with no material stats from the Eurozone.

From the U.S

It was also a quiet day on the U.S economic calendar. There were no majors stats from the U.S to spook the markets late in the European session.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Volkswagen surged by 6.18%, with BMW and Daimler ending the day up by 3.42% and by 2.72% respectively. Continental rose by a more modest 1.21%.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 4.03% and 2.13% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 2.44% and by 2.49% respectively, with Soc Gen gaining 3.60%.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 2.81% and 2.34% respectively.

Air France-KLM bucked the trend, falling by 0.83%, while Airbus SE rallied by 3.43%.

On the VIX Index

It was back into the red for the VIX on Friday, marking a 5th day in the red from 7-sessions.

Partially reversing a 17.28% jump from Thursday, the VIX slid by 14.84% to end the day at 16.18.

The Dow rallied by 1.30%, with the NASDAQ and the S&P500 ending the day up 0.98% and by 1.13% respectively.

VIX 120721 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no material stats to provide the majors with direction through the early part of the European session.

From the U.S, there are also no material stats to consider later in the day.

The lack of stats will leave the markets to consider the latest updates on the Delta variant of the coronavirus.

Late in the session, expect direction to come from the U.S majors, however, as the markets prep for earnings season, which kicks off this week.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 2 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Week in Review – 09/07/21

The Majors

It was a mixed week for the majors in the week ending 9th July, with a Friday rebound delivering much-needed support.

The CAC40 fell by 0.36%, while the DAX30 and the EuroStoxx600 ended the week up by 0.24% and by 0.19% respectively.

Economic data from Germany and other major economies weighed on riskier assets in the week.

While survey-based numbers have been impressive, non-survey-based data has raised some concerns over current economic conditions and the outlook.

Significantly, low vaccination rates in some economies and the ongoing spread of the Delta variant tested appetite for riskier assets.

Mixed signals by the FED were also a test, while the ECB left the door open for extended policy support by making adjustments to its objectives. The ECB interest rate target was revised and lifted to a firm 2%, which suggests extended status quo on the policy front.

The weak stats from Germany and some disappointing data from China in recent weeks muted the impact of the minutes, however.

In spite of the market jitters and impact on the majors, bargain hunters jumped in on Friday to reverse the losses from the week.

The Stats

It was another busy week.

Early in the week, service sector PMIs for June were in focus, with the stats skewed to the positive.

For the Eurozone, the services PMI increased from 55.2 to 58.3 in June, which was up from a prelim 58.0.

For June, the Composite PMI came in at 59.5. This was up from a May 57.1 and a prelim 59.2.

According to the finalized survey,

  • The private sector economy expanded at the fastest pace for 15-years in June.
  • Support came from a marked increase in output across both service and manufacturing.

By Country,

  • Ireland ranked 1st, with a 2-month low Composite PMI of 63.4, followed by Spain. In June Spain’s Composite PMI surged to a 256-month high 62.4.
  • Germany ranked 3rd, with a 123-month high 60.1, following by Italy and then France. Both saw their respective composites reach 41-month highs at the end of the 2nd

The rest of the stats in the week were skewed to the negative, however.

Economic sentiment for Germany and the Eurozone waned. The Eurozone’s ZEW Economic Sentiment Index falling from 81.3 to 61.2.

Stats from Germany also disappointed in the week.

Significantly, factory orders and industrial production both fell unexpectedly in May, with Germany’s trade surplus narrowing.

The numbers raised question marks over the resilience of the economy recovery.

On the monetary policy front, the ECB meeting minutes were also in focus. A shift in the ECB’s inflation target to 2% was the only headline.

From the U.S

After Monday’s holiday, service sector PMIs for June were in focus on Tuesday.

The all-important ISM Non-Manufacturing PMI fell from 64.0 to 60.1. While in decline, plus 60 levels continued to support the bullish outlook on the U.S economy.

On Wednesday, JOLT’s job openings for May had a muted impact on the Dollar as did the weekly jobless claim figures.

In the week ending 2nd July, initial jobless claims rose from 371k to 373k.

On the monetary policy front, the FOMC meeting minutes delivered mixed signals. The minutes pointed to a more patient stance on policy easing concerns of an imminent move. As expected, there was tapering talk, however.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Continental and Daimler slid by 4.99% and by 4.56% respectively to lead the way down, with BMW falling by 2.92%. Volkswagen, bucked the trend, however, ended the week up by 0.40%.

It was a bearish week for the banking sector. Deutsche Bank and Commerzbank saw losses of 3.57% and 3.38% respectively.

From the CAC, it was a bearish week for the banks. BNP Paribas slid by 2.94% to lead the way down, with Soc Gen ending the week down by 1.20%. Credit Agricole fell by a more modest 0.51%.

The French auto sector also struggled with Stellantis NV and Renault falling by 1.27% and by 5.66% respectively.

Air France-KLM joined the broader market in the red, with a 1.72% loss. Airbus bucked the trend, however, rising by 0.48%.

On the VIX Index

Two consecutive weeks in the red came to an end for the VIX. In the week ending 9th July, the VIX rose by 7.37%. Reversing a 3.52% decline from the previous week, the VIX ended the week at 16.18.

2-days in the green from 5 sessions, which included a 17.28% jump on Thursday delivered the upside in the week.

For the week, the Dow rose by 0.24%, with the NASDAQ and the S&P500 ending the week up by 0.43% and by 0.40% respectively.

VIX 100721 Weekly Chart

The Week Ahead

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

Industrial production figures for the Eurozone on Wednesday and trade data on Friday will be in focus.

Following some disappointing numbers last week, we can expect increased sensitivity to the Eurozone figures.

Through the week, finalized inflation figures for member states and the Eurozone will also draw interest.

The Eurozone’s inflation figures on Friday will be key on the inflation front.

From the U.S, inflation figures will also be in focus early in the week. With market concerns over FED monetary policy lingering, expect the numbers to influence.

On Thursday, jobless claims and Philly FED manufacturing numbers will draw attention.

Wrapping things up will be retail sales and consumer sentiment figures on Friday. Expect the retail sales figures to be key.

Also in focus, will be economic data from China late in the week. 2nd quarter GDP numbers are due out along with fixed asset investment, industrial production, and trade data.