EUROPEAN EQUITIES UPDATE: Europe indecisive and US lacklustre as the Biden/Xi call nears with Russia/Ukraine in the background

Analysis details (09:28)

The mood in Europe remains indecisive but has been erring marginally lower recently after what has been a busy week thus far. The Russia-Ukraine situation remains the focal point, whilst a meeting between US President Biden and Chinese President Xi is slated for 13:00BST/09:00EDT. The call will of course attract attention and comes amid some positive noises surrounding the nations’ capital markets. That being said, the Ukrainian situation will likely carry the heaviest weight in this particular interaction – with China earlier this week stating they will continue “normal economic trade relations with Russia and Ukraine” whilst also warning the US over their threat to punish firms that circumvent US sanctions. The aim of Washington is for Beijing not to cushion the effects of Western sanctions on Russia. Although no breakthroughs are expected, it will be interesting to monitor the tone from the two sides after the meeting. It’s also worth being aware that a Chinese aircraft carrier sailed through the Taiwan Strait on Friday, according to Reuters sources, and was shadowed by a US destroyer. In terms of the Russia-Ukraine situation itself, Senior EU officials have “an incredibly dire assessment about likely trajectory of Russia's war of aggression in Ukraine over next few weeks”, according to Eurasia's Rahman. Negotiations are slow and there are fears that Russia is attempting to buy time following little military progress this week. Further, strikes were reported in the western Ukrainian city of Lviv - just over an hour's drive from the Polish border. As a reminder, Ukraine is bordered by four NATO members: Poland, Hungary, Romania and Slovakia. In terms of today’s trade, Europe awaits the next catalyst whilst futures and options eye Quad Witching. US equity futures hold a downside bias with broad-based losses across the ES (-0.5%), NQ (-0.6%), YM (-0.5%) and RTY (-0.5%). To put this week’s back-to-back risk-on into perspective, BofA Flow Show signalled a large USD 25.4bln inflow to stocks (largest in five weeks), USD 1.7bln into gold, USD 14.9bln outflow from bonds (largest since Mar’21) – although the bank frames it as the “zeitgeist now ‘bear market rally into ceasefire’”. As a heads up, next week will see a myriad of scheduled Fed speakers, whilst Fed’s Bakin, Bowman and Waller are on today’s slate (refer to the Newsquawk calendar for details). Back in Europe, sectors are mixed but with a defensive bias whilst Tech is also favoured. Banks, Industrial Goods and Energy. In terms of individual movers, Vodafone (+1.3%) is firmer following speculation regarding divestment of its Vantage Towers (+9.0%). Ted Baker (+20%) adds to yesterday’s gains after Sycamore has confirmed source reports that it is mulling a possible cash offer for the Co. Ted Baker confirmed it has not yet received an approach from Sycamore but would evaluate any offer. On the flip side, EDF (-1.0%) is pressured by the announcement of a capital increase.

18 Mar 2022 - 09:28- EquitiesResearch Sheet- Source: Newswires