The week from the 23rd to the 27th April 2018 saw volumes traded on European markets 6.2% above the 12 month average, as the STOXX 600 rose for the fifth consecutive week, up 0.7%. European markets were widely supported by positive economic data in a news heavy week. Firstly, the Eurozone’s PMI remained flat, halting two consecutive months of declines. The key event was the ECB’s interest rate decision, with rates left unchanged as ECB president Mario Draghi said that monetary stimulus would remain necessary over coming months, whilst highlighting the underlying strength in the economy. The monetary union’s largest economy, Germany saw PMI rise, indicating renewed confidence in the private sector, as unemployment remained at record low. Meanwhile in Eurozone’s second largest economy, France, GDP growth slowed in the first quarter, to 0.3% QoQ.
Geopolitical uncertainty: a threat to European growth
Consumer confidence in Europe’s largest economy was down, with German consumers concerned with rising geopolitical uncertainty on a global scale, notably tensions in the Middle East, with the EU’s largest exporter’s consumers also worried about the implications of trade protectionism. This uncertain global environment was also something discussed by Mario Draghi, stating that the increase in protectionist rhetoric was a rising risk to the Eurozone’s outlook, with European exporters, already struggling with the strengthening currency, in particular at risk.
UK GDP at lowest level since 2012
UK output growth slowed to 0.1% over the first quarter of 2018, its worst reading in five years, as the poor weather conditions were blamed again for weak economic data. This is significantly below economist expectations of 0.3% growth over 1Q18. In other disappointing economic data, UK factory growth hit a 17 month low. The pound fell by1.6% against the dollar over the week, supporting the export heavy FTSE 100 (+1.8%), top performing index in Europe, whilst the FTSE 250 lagged, up 0.25%.
Sweden listed entities supported by weaker currency
Companies listed on the OMXS30 represented five of the ten top performing stocks over the week. Swedish companies’ performances were supported by the Riksbank’s dovish stance, leading to the Swedish Krona hitting its lowest level against the euro since 2009. Heavy exporter H&M rose 12.6% through the week.
Neste soared 26.8% as the biofuel producer recorded its highest ever quarterly results over 1Q18, supported by US tax breaks and biofuel production. The company also announced the reduction of seven million metric tons of Greenhouse gas emissions. Neste has been leading the charge on creating cleaner renewable fuels for the North American market since 2012.
Be Semiconductor dropped 21.6% as the Dutch technology company reported its Q1 results.
Osram Licht dropped 18.2% to its lowest in 52 weeks after the German lighting maker cut its FY guidance. Meanwhile, Philips Lighting also fell sharply (-18.0%) after the world’s largest lighting maker reported worse than expected Q1 earnings due to falling sales and margins, especially in the United States.
Kering gained 10.6% as the luxury goods maker said Q1 revenue jumped 27%, led by its flagship Gucci brand and “exceptional momentum” at Balenciaga.
- 02.05.2018: UK construction PMI; Eurozone Unemployment (March); FOMC decision
- 03.05.2018: Eurozone CPI; UK services PMI
All three of the top ETFs by investment in Europe saw their AUMs down over the week, implying redemptions.
*Above ETFs have combined ~$92B AUM invested in European names
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Nasdaq Advisory Services European Team Alexander Free
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