European Equities: A Week in Review

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.

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