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European Equities: A Week in Review

The Stats

It was a relatively busy week on the economic calendar.

In the 1st half of the week, German industrial production and German and Eurozone economic sentiment figures were in focus.

The stats were skewed to the positive. Industrial production rose by 3.2% in October, following a 1.6% increase in September.

COVID-19 vaccine news shifted sentiment towards the economic outlook ahead of the ECB press conference on Thursday.

Germany’s ZEW Economic Sentiment Index rose from 39.0 to 55.0, with the Eurozone’s rising from 32.8 to 54.4 in December.

Mid-week, October trade data from Germany failed to impress, with exports rising by just 0.8% and imports by 0.4%.

On the monetary policy front, the ECB delivered further support, by increasing the PEPP by €500 billion. This was largely expected, leaving the market response muted.

A downward revision to 2021 growth forecasts weighed on the European majors on Thursday, however. The ECB revised growth for 2021 down from 5% to 3.9%.

At the end of the week, finalized inflation figures from Spain and Germany had a muted impact on the majors.

From the U.S

Labor market figures raised more red flags on Thursday, with initial jobless claims jumping to 853k in the week ending 4th December. In the week prior, initial jobless claims had stood at 716k.

At the end of the week, prelim consumer sentiment figures for December were in focus. The Michigan Consumer Sentiment Index rose from 76.9 to 81.4, with the expectations index increasing from 70.5 to 74.7.

The pickup in sentiment failed to support the European majors, however.

From elsewhere

Trade data from China failed to support the majors at the start of the week, in spite of a surge in exports and the trade surplus.

The Market Movers

From the DAX, it was a bearish week for the auto sector. BMW slid by 6.17%, with Continental and Daimler seeing losses of 5.69% and 5.48% respectively. Volkswagen fell by a more modest 3.51% in the week.

It was a particularly bearish week for the banking sector, however. Commerzbank and Deutsche Bank ended the week down by 7.97% and by 9.58% respectively.

From the CAC, it was a bearish week for the banks. BNP Paribas and Credit Agricole fell by 5.73% and by 6.79% respectively, with Soc Gen sliding by 8.8%.

It was a mixed week for the French auto sector, however. Peugeot eked out a 0.19% gain, while Renault fell by a relatively modest 1.79%

Air France-KLM slid by 5.94%, with Airbus ending the week down by 4.21%.

On the VIX Index

It was back into the green after 2 consecutive weeks in the red for the VIX. In the week ending 11th December, the VIX rose by 12.12%. Reversing a 0.24% decline from the previous week, the VIX ended the week at 23.31.

A continued spike in new COVID-19 cases, disappointing labor market numbers, and a failure to deliver a stimulus package supported the pickup in the VIX.

For the week, S&P500 fell by 0.96%, with the Dow and the NASDAQ seeing losses of 0.57% and 0.69% respectively.

The majors would have seen heavier losses had it not been for a last gasp approval to extend federal funding on Friday. With a government shutdown avoided, lawmakers will have more time to negotiate an essential COVID-19 relief package.


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