European Equities: A Week in Review – 31/12/20

The Majors

It was a bullish final week of the year for the European majors. The CAC40 and the EuroStoxx600 rose by 0.53% and by 0.77% respectively, with the DAX30 gaining 0.97%.

A pullback on Thursday left the CAC40 and EuroStoxx600 with modest gains, while the German markets were closed on Thursday.

In a shortened week for the majors, COVID-19 vaccinations and the Brexit deal delivered support to the majors in the week.

With EU-wide vaccinations in progress and a no-Brexit withdrawal from the EU averted, optimism towards 2021 supported riskier assets.

U.S stimulus and expectation of more stimulus in the New Year added to the optimism towards the economic outlook for next year.

The upside was limited, however, with a continued rise in new COVID-19 cases and the new and more virulent strain of the virus a concern.

It was a quiet week on the economic calendar. Key stats included French job seeker totals and prelim December inflation figures from Spain.

In France, job seekers rose from 3,549.7k to 3,586.3k in November. The markets were forgiving, however, with lockdown measures in November contributing to the uptick.

From Spain, deflationary pressures eased at the end of the year. Consumer prices fell by 0.5%, year-on-year, following a 0.8% decline in November. The Harmonized Index for Consumer prices fell by 0.6%, following a 0.8% decline in November

The stats ultimately had a muted impact on the majors, however.

From the U.S

Economic data was on the busier side. Key stats included November goods trade data and pending home sales and Decembers Chicago PMI.

The stats were mixed, with the goods trade deficit widening and pending home sales sliding in November.

On the positive, however, was a pickup in the Chicago PMI from 58.2 to 59.5 in December.

On Thursday, the weekly jobless claims figures were out after the shortened European session.

The Market Movers

From the DAX, it was a bearish week for the auto sector.BMWslid by 1.62% to lead the way down, with Continentaland Daimlerfalling by 0.53% and by 0.82% respectively. Volkswagenslipped by just 0.01% in the week.

It was also a bearish week for the banking sector. Commerzbankslid by 1.68%, with Deutsche Bankfalling by 0.11%.

From the CAC, it was a bearish week for the banks.Credit Agricoleslid by 1.90%, with BNP Paribasand Soc Genfalling by 1.58% and by 1.45% respectively.

It was also a bearish week for the French auto sector, however. Peugeotand Renaultended the week with losses of 1.63% and 2.30% respectively.

Air France-KLMrallied by 5.28%, following a 3.69% gain from the previous week, while Airbusended the week down by 2.46%.

On the VIX Index

It was just a second weekly gain from 6-weeks for the VIX. In the week ending 31st December, the VIX rose by 5.67%. Reversing a 0.19% decline from the previous week, the VIX ended the week at 22.75.

For the week, Dow and S&P500 rose by 1.35% and by 1.43% respectively, with the NASDAQ gaining 0.65%.

The Week Ahead

Its a particularly busy week ahead on the economic calendar.

Key stats include private sector PMI numbers for December and German unemployment, retail sales, trade, and industrial production figures.

French consumer spending figures will also draw attention in the week.

Other stats include member state inflation and Eurozone retail sales and unemployment figures that should have a muted impact.

From the U.S, the markets preferred ISM private sector PMIs, the weekly jobless claims, and nonfarm payrolls will influence.

Out of China, the Caixin Manufacturing PMI ahead of the European open on Monday will set the tone.

Away from the economic calendar, COVID-19 news and chatter from Capitol Hill will remain in focus.