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European Equities: A Week in Review

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…

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2020-06-05 23:19:45

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