EUROPEAN EQUITIES UPDATE: Europe edges higher and US futures are lifted in quiet summer trade

Analysis details (10:15)

The major bourses in Europe opened in the green across the board and have extended those gains as risk appetite remains firm with markets also observing a summer lull. The APAC lead was also positive, although Japan was closed to Marine Day, whilst US equity futures have edged higher since the resumption of futures trading – with the NQ (+1.3%) narrowly outperforming peers (ES +1.0%, RTY +1.1%, YM +1.1%). In terms of house views, Morgan Stanley’s Wilson suggests US equities could remain in a bear market even if a recession is avoided, with strategists sceptical about margin pressures easing after Q2 “given the myriad of cost pressures companies are facing, coupled with decelerating demand risk”. Meanwhile, JPM believes that the market could be nearing the point when bad data starts to be seen as good – a view also shared by Citi – assuming the Fed pivots from its inflation mandate, which JPM believes could happen as soon as September, thus tempting investors to step back into the market. JPM also warns that Q2 guidance is likely to be weak on cost. The Stateside earnings docket today includes the likes of Bank of America, Goldman Sachs (6.2% Dow weighting), Prologis, and Charles Schwab, whilst IBM reports after the bell. Back in Europe, the Italian FTSE MIB (+1.2%) was initially lagging against its peers at the open amidst the political turmoil but thereafter conformed to regional gains. Sectors are firmer across the board with the upside spearheaded by Basic Resources, Energy, and Banks – due to price action in underlying commodity prices, alongside yields. Overall, the sectoral picture is an anti-defensive one with Healthcare, Food & Beverages and Telecoms among the straddlers. In terms of individual movers, BAE Systems (+1.9%) is firmer after being awarded a US Army contract worth USD 1.29bln. Delivery names have shrugged off a downbeat update from Deliveroo (+1.2%) cut its FY global Gross Transaction Value to the range of +4-12% from +15-25%. Elsewhere, GSK’s Haleon unit saw its London IPO today with a market cap of over GBP 30bln, marking the largest UK listing in a decade, whilst the Co’s NYSE plans are still waiting for approval. All-in-all, most of the Stoxx 600 has conformed to the upbeat tone, whilst the other side of the spectrum sees Direct Line (-12%) plumbing the depths after issuing a profit warning amid “heightened market volatility”, with peer Admiral (-7.4%) dragged lower in sympathy while it saw a broker downgrade at Jefferies.

18 Jul 2022 - 10:15- EquitiesResearch Sheet- Source: Newsquawk