European Equities: A Week in Review – 29/08/20

In This Article:

The Majors

It was a bullish week for the European majors in the week ending 28th August. The CAC40 and DAX40 rose by 2.18% and by 2.10% to lead the way, with the EuroStoxx600 seeing a more modest 1.02% gain.

A bearish 2nd half of the week limited the upside for the European majors, however.

Economic data from the U.S on Thursday that included 2nd quarter GDP and weekly jobless claims figures weighed.

On the positive, however, was news of Germany ramping up fiscal stimulus to combat the effects of the COVID-19 pandemic. France announced that it would also roll out fiscal stimulus in September, which was also market positive.

FED Chair Powell weighed on the majors in the 2nd half of the week, however. Talking from Jackson Hole, Powell laid out the FED’s new monetary policy framework.

In a nutshell, the FED has now adopted an average inflation strategy. This means that the FED would tolerate higher inflation for longer to balance out periods of low inflation. Additionally, the FED announced that it would not look to create spare capacity in the economy to counter inflationary pressures.

While the news was largely expected, bank shares suffered on Thursday as a result. A low for longer interest rate environment is also a reminder of just how concerned the FED is over the economic outlook.

The Stats

It was another busy week on the Eurozone economic calendar.

In the 1st half of the week, it was Germany in focus.

The stats were skewed to the positive. 2nd quarter GDP numbers were revised upwards, with the IFO Business Climate Index on the rise.

Through the 2nd half of the week, economic indicators from France and Germany drew attention.

In France, consumer confidence held steady in August, while consumer confidence waned in Germany.

French consumer spending also disappointed according to August numbers, with 2nd quarter GDP numbers unchanged.

All-in-all, the mixed set of numbers coupled with fresh spikes in new COVID-19 cases in France and Germany were negatives.

From the U.S

It was another mixed week on the economic data front.

Consumer confidence took an unexpected dive in August, with the weekly initial jobless claims continuing to hover at the 1m mark.

On the positive, however, was another jump in durable goods and core durable goods orders in July.

FED Chair Powell’s speech from Jackson Hole, however, added pressure on the Greenback, leading to a jump in the EUR.

With European manufacturers struggling, a prolonged period of EUR strength will be a test.

At the end of the week, stats included inflation, personal spending, and finalized consumer sentiment figures.