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European Equities: A Week in Review – 22/10/21

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The Majors

It was a mixed week for the majors in the week ending 22nd October. The DAX30 fell by 0.28%, while the EuroStoxx600 and the CAC40 ended the week with gains of 0.53% and 0.09% respectively.

Disappointing economic data from China set the tone at the start of the week.

In the 3rd quarter, the Chinese economy grew by just 0.2% after having expanded by 1.3% in the previous quarter. Year-on-year, the economy grew by 4.9% versus 7.9% in the quarter prior.

From the Eurozone, a pickup in German wholesale inflation and the upward trend in consumer prices across the Eurozone was also market negative.

Relatively positive manufacturing PMIs for Germany and the Eurozone, and upbeat service sector PMI figures from the U.S were market positive, however.

In the week, corporate earnings also tested support for the majors. While earnings results were upbeat, outlooks for the quarters ahead were gloomy amidst supply constraints and cost pressures.

The Stats

Inflation figures were in focus mid-week.

German wholesale inflationary pressures picked up, with the annual wholesale rate of inflation accelerating from 12.0% to 14.2%.

Finalized inflation figures for the Eurozone also affirmed the current trend in consumer prices.

In September, the Eurozone’s annual rate of inflation picked up from 3.0% to 3.4%.

On Thursday, consumer confidence disappointed, however. For October, the Eurozone’s consumer confidence indicator fell from -4.0 to -4.8.

At the end of the week, however, prelim private sector PMIs for October provided some comfort.

Germany’s Manufacturing PMI slipped from 58.4 to 58.2, with the Eurozone’s Manufacturing PMI falling from 58.6 to 58.5.

Service sector activity saw a more marked slowdown in growth at the turn of the quarter.

The Eurozone’s Services PMI fell from 56.4 to 54.7.

From the U.S

Early in the week, industrial production disappointed, with production falling by 1.3% in September. Production had fallen by 0.1% in August.

On Thursday, the focus shifted to Philly FED Manufacturing PMI and jobless claims figures.

While the Philly FED Manufacturing PMI fell from 30.7 to 23.8, the employment sub-index rose from 26.3 to 30.7.

Jobless claims also provided a positive view of labor market conditions. In the week ending 15th October, jobless claims fell from 296k to 290k. Avoiding a return to 300k levels was key.

At end of the week, prelim private sector PMIs delivered mixed results.

In October, the Manufacturing PMI slipped from 60.7 to 59.2, while the Services PMI rose from 54.9 to 58.2. The pickup in service sector activity was key in the week.

On the monetary policy front, FED Chair Powell spoke at the end of the week, with the FED on scheduled to begin tapering.

The Market Movers

From the DAX, it was a bearish week for the auto sector. BMW and Daimler slid by 1.95% and by 1.84% to lead the way down. Continental and Volkswagen weren’t far behind, with losses of 1.55% and 1.43%.

It was a bullish week for the banking sector, however. Deutsche Bank and Commerzbank ended the week up by 1.98% and by 4.26% respectively.

From the CAC, it was a mixed week for the banks. Soc Gen and BNP Paribas fell by 1.01% and by 0.07% respectively. Credit Agricole ended the week up by 0.78%, however.

It was a bearish week for the French auto sector. Stellantis NV fell by 0.92%, with Renault sliding by 6.23%.

Air France-KLM tumbled by 7.03%, with Airbus ending the week down by 4.46%.

On the VIX Index

It was a third consecutive week in the red for the VIX in the week ending 22nd October.

Following a 13.16% fall from the previous week, the VIX fell by 5.34% to end the week at 15.43.

3-days in the red from 5 sessions, which included a 3.74% slide on Tuesday delivered the downside in the week.

For the week, the S&P500 rose by 1.64%, with the Dow and the NASDAQ ending the week up by 1.08% and by 1.29% respectively.

The Week Ahead

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

Early in the week, German business sentiment will be in focus, with the Ifo Business Climate Index figures due out.

With plenty of market sensitivity to both consumer and business confidence, expect the numbers to influence.

On Thursday, the German economy will be back in focus, with unemployment numbers due out.

At the endo of the week, 3rd quarter GDP numbers for France, Germany, and Spain will be key.

On the monetary policy front, however, the ECB policy decision and press conference will have the greatest impact.

While the markets are expecting adjustments to the asset purchasing program, a shift in sentiment towards inflation and interest rates could spook the markets.

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

Consumer confidence and core durable goods orders will be key stats in the first half of the week.

On Thursday, 3rd quarter GDP and jobless claims will likely have a greater influence ahead of inflation and personal spending figures on Friday.

Away from the economic calendar, corporate earnings will also provide the majors with direction.

This article was originally posted on FX Empire

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