Yahoo Finance European Equities: A Week in Review – 06/06/20
The Majors
It was a bullish start to the month of June for the European majors, with the majors seeing a 3rd consecutive week in the green.
The DAX30 and CAC40 rallied by 10.88% and 10.70% respectively to lead the way, with the EuroStoxx600 seeing a more modest 7.12% gain.
Improving private sector PMIs for May, the easing of lockdown measures, and fiscal stimulus provided support.
On Thursday, the ECB also delivered, with expansion and extension to its emergency purchasing program.
While the PMI’s were up from April’s record lows, the numbers continued to reflect dire economic conditions across the Eurozone.
Hopes are, however, that government and central bank measures will support the rebound.
From the U.S, the weekly jobless claims figures did test risk appetite ahead of Friday’s nonfarm payrolls. It wasn’t enough, however, with optimism trumping the grim economic environment. Friday’s stats added fuel to the rally on Friday.
From the U.S, a report revealed that another round of stimulus of up to $1tn is due to be rolled. This came off the back of the German coalition’s larger than anticipated fiscal stimulus announcement mid-week.
Germany’s coalition government had agreed to a €130bn COVID-19 stimulus package on Wednesday. Concerns over global demand, however, will likely linger until the stats start to reflect a pickup in demand.
On the geopolitical front, there was no major escalation in tensions between the U.S and China to spook the markets. COVID-19 updates also further supported the continued easing of lockdown measures across the region.
The Stats
It was a busy week on the Eurozone economic calendar.
Key stats included May’s private sector PMIs for Spain and Italy and finalized PMIs for France, Germany, and the Eurozone. All the PMIs saw an uptick from April’s unprecedented slump.
The Eurozone’s Composite PMI came in at 31.9 in May, which was up from an April 13.6 and May prelim 30.5. In April, the PMI had fallen from 29.7 to 13.6.
According to the Eurozone’s finalized Markit Survey,
Private sector activity continued to contract at a marked pace in May.
Both the manufacturing and the services sectors suffered noticeable contractions in output.
At the country level, there was a broad-based improvement in the composite PMIs.
Italy was the best-performing, followed by Germany and then France. Spain remained the weakest performing member state.
While at a slower pace, the incoming new business continued to fall at a marked pace.
Excess capacity led to a sharp fall in backlogs, with the net fall in employment severe and amongst the greatest on record.
Confidence remained negative, whilst up from March’s series low.
Other stats in the week included employment figures from Germany, Spain, and the Eurozone, Eurozone retail sales figures, and Germany factory orders.
With the markets brushing aside April stats, however, there was little influence on the majors in the week.
From the U.S, the private sector PMIs also reflected a slower pace of contraction in May. Ahead of Friday’s labor market numbers, however, the weekly jobless claims disappointed once more.
The weekly jobless claims rose by 1.877m in the final week of May, pointing to a 20% unemployment rate for May.
On Friday, nonfarm payrolls and the U.S unemployment rate was the main area of focus on the economic calendar.
The markets had prepared for a U.S unemployment rate of 20%. It was far better, with May’s unemployment rate actually falling from 14.7% to 13.3%. While the skeptics may raise doubts over the headline number, it was bullish for the majors.
Getting to sub-10% will be the next target but that was a wrap for the bulls and a breakout week.
The Market Movers
From the DAX, it was a particularly bullish week for the auto sector. Daimler surged by 16.15% to lead the way, with BMW and Volkswagen rallying by 11.69% and 10.78% respectively. Continental wasn’t far behind, rising by 9.28% in the week.
It was an even more impressive week for the banking sector. Commerzbank jumped by 26.45%, with Deutsche Bank rallying by 13.32%.
Lufthansa continued its recovery, with a 14.73% rally in the week. The gains came off the back of a 17.13% breakout from the week prior.
From the CAC, it was also a particularly bullish week for the banks. BNP Paribas and Soc Gen surged by 21.26% and 27.36% respectively. Credit Agricole saw a more modest, but impressive, 16.37% gain.
It was also an impressive week for the French auto sector. Peugeot and Renault surged by 20.45% and by 28.37% respectively.
Air France-KLM followed on from last week’s 12.67% rally, with a 37.1% gain. Airbus trumped the pack, however, surging by 42.82%.
On the VIX Index
It was 3rd consecutive week in the red for the VIX. In the week ending 6th June, the VIX fell by 10.87%. Following on from a 3.78% fall from the previous week, the VIX ended the week at 24.52.
Upbeat sentiment towards the economic outlook weighed on the VIX in the week.
This sentiment was supported by fiscal stimulus and economic indicators showing some improvement in the economic environment.
At the end of the week, U.S nonfarm payrolls and the unemployment rate further eased market fears of more dire conditions to come.
The effect of the continued easing of lockdown measures was reflected in the U.S unemployment rate that fell from 14.7% to 13.3%. Economists had forecast an unemployment rate of 20%.
The S&P500 ended the week up by 4.91%, with the Dow and NASDAQ gaining by 6.81% and by 3.42% respectively.
The Week Ahead
It’s a quieter week ahead on the Eurozone economic calendar.
Economic data through the week are limited to 1st quarter and April numbers that the markets will brush aside.
Stats include April industrial production and trade data out of Germany and 1st quarter GDP and industrial production numbers for the Eurozone.
Expect finalized inflation figures for May to also be brushed aside.
With the latest fiscal and monetary policy support, the markets have a few more months before needing to assess the impact.
That should support the continued demand for riskier assets, barring a major risk-off event…
Judging by the German coalition government’s stimulus plan, other member states will likely follow.
Much will depend, however, on consumption to support the services sector and hiring. The good news for manufacturers is that governments globally are delivering stimulus, which should eventually support manufacturing activity.
From elsewhere, the U.S weekly jobless claims June consumer sentiment figures are due out, with trade data from China also of interest.
On the monetary policy front, expect the FED to continue to assure support, which will leave the markets focused on the FOMC projections on Wednesday…
Away from the economic calendar, the markets will need to continue to monitor chatter from Beijing and Washington. COVID-19 numbers will need to avoid a spike…
This article was originally posted on FX Empire
More From FXEMPIRE:
Crude Oil Weekly Price Forecast – Crude Oil Markets Have Strong Week
S&P 500 Price Forecast – Stock Markets Continue Break Out After Jobs Number
Crude Oil Price Forecast – Crude Oil Markets Continue to Reach Towards Gap
S&P 500 Weekly Price Forecast – Stock Markets Shoot Straight Up In The Air Again for the Week
EOS, Ethereum and Ripple’s XRP – Daily Tech Analysis – 06/06/20
