European Equities: A Week in Review

The Stats

In the 1st half of the week, ZEW Economic Sentiment figures for Germany and the Eurozone disappointed.

In November, Germany’s ZEW Economic Sentiment Indicator slid from 56.1 to 39.0. The Eurozone’s indicator fell from 52.3 to 32.8. The deterioration was a reflection of investor sentiment towards the latest lockdown measures.

On Thursday, the ECB’s Economic Bulletin raised more red flags over the economic outlook. The doom and gloom bulletin ended a run of 3 consecutive days in the green for the European majors.

On Friday, 3rd quarter GDP numbers for the Eurozone also failed to impress, with downward revisions pinning back the majors. Quarter-on-quarter, the economy grew by 12.6%, coming up short of the 1st estimate of 12.7%.

Finalized inflation figures from Germany, France, and Spain, and Eurozone industrial production and trade data had a muted impact in the week.

On the monetary policy front, ECB President Lagarde assured the markets of more support next month. The comments off the back of the upbeat vaccine trial numbers from Pfizer Inc. and BioNTech SE.

From the U.S

In the 1st half of the week, JOLTs job openings for September had a muted impact on the markets. The majors brushed aside disappointing numbers, as investors responded to the positive vaccine news.

On Thursday, inflation and jobless claims figures contributed to a Thursday pullback.

Inflationary pressures eased at the turn of the quarter, with the annual core rate of inflation softening from 1.7% to 1.6%.

Jobless claims figures came in better than forecasted but were not good enough to ease concerns over labor market conditions.

In the week ending 6th November, initial jobless claims came in at 709k, down from the previous week’s 757k.

At the end of the week, prelim November consumer sentiment and October wholesale inflation figures were also in focus.

The Michigan Consumer Sentiment Indicator fell from 81.8 to 77.0. Concerns over the 2nd wave of the COVID-19 pandemic and economic uncertainty weighed.

Wholesale inflation figures also disappointed, with the core Producer Price Index rising by just 0.10% in October. In September, the core producer price index had risen by 0.4%.

The U.S majors found strong support at the end of the week, in spite of the weak numbers, however.

The Market Movers

From the DAX, it was another particularly bullish week for the auto sector. Continental jumped by 14.38% to lead the way. BMW and Volkswagen were closed behind, rallying by 11.02% and by 12.35% respectively. Daimler saw a more modest 8.69% gain for the week.

It was also a bullish week for the banking sector. Commerzbank surged by 23.62%, with Deutsche Bank ending the week up by 5.61%.

From the CAC, it was a particularly bullish week for the banks. BNP Paribas surged by 20.13%, with Credit Agricole and Soc Gen rallying by 16.15% and by 19.50% respectively.

The French auto sector also found further support. Peugeot rallied by 11.11%, with Renault ending the week up by 27.79%.

Air France-KLM followed last week’s 9.43% gain with a 26.67% rise, with Airbus rallying by 22.23%.

On the VIX Index

It was a 2nd consecutive week in the red and a 3rd weekly drop from 7 for the VIX. In the week ending 13th November, the VIX fell by 7.08%. Following on from a 34.61% slide from the previous week, the VIX ended the week at 23.10.

Positive data from Pfizer Inc. and BioNTech SE on their COVID-19 vaccine trials delivered the upside in the week. The gains came in spite of continued rising new COVID-19 cases in Europe and the U.S.

Going into the week Biden became the President-Elect, which was also market positive. At the end of the week, Trump’s chances of overturning the result diminished, with Biden taking Arizona, another positive outcome for the markets.

For the week, the NASDAQ fell by 0.55%, while the Dow and S&P500 saw gains of 4.08% and 2.16% respectively.

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