EUROPEAN EQUITIES UPDATE: Stocks await progress in peace talks ahead of a risk-packed week

Analysis details (09:42)

Stocks in Europe kicked off the week cautiously, with indecisive trade and a mild downside bias seen heading into and shortly after the cash open, following a somewhat mixed APAC session. The mood across stocks however has been veering higher despite a lack of fresh newsflow but price action is contained for the time being, with the ES (-0.1%), NQ (-0.3%) YM (-0.4%) and RTY (-0.4%) trimming APAC losses – although this week sees a myriad of scheduled Fed speakers including a double-dose of Chair Powell. Looking at last week’s Wall Street rally, analysts at Morgan Stanley suggest that this is a bear market to sell and position more defensively. “Last week was nothing more than a vicious bear market rally…While it may not be completely finished, it is a rally to sell.” In terms of the US pre-market - Boeing (-7.0%) has taken a hit pre-market after a Boeing 737 China Eastern Airlines passenger jet flying from Kunming to Guangzhou on Monday experienced an accident in Guangxi. Boeing currently holds around a 3.7% weighting in the DJIA. Back to Europe, the tentative tone persists (Euro Stoxx 50 +0.1%; Stoxx 600 Unch) as constructive progress on the Russia-Ukraine is yet to be seen, and with Russia seemingly upping the ante with media reports of hypersonic missiles and thermobaric missiles used against Ukraine. Further, Russia’s Kremlin suggested the progress of peace talks with Ukraine is not as big as it should be and there is no basis for a possible Putin-Zelensky meeting as significant progress needs to be made first, whilst a ceasefire will not be put in place during negotiations. This comes as European leaders, alongside US President Biden, speak today and get ready to meet mid-week to discuss the war. Defence and Security will be among the top topics and that day will mark one month since the war began. Western officials will likely continue to resist this option whilst expressing solidarity with Ukraine and mulling over further sanctions. Reports over the weekend flagged the discussion of a potential European oil embargo against Russia, although it seems to be largely the Baltics that are pushing for this - Eurasia’s Rahman suggested, “The threshold for energy import bans is very high”, although some fear the West has exhausted a large part of its sanction arsenal. Elsewhere, the FTSE 100 (+0.5%) resides as one of today’s top performers with exporters feeling tailwinds from the recent Sterling pullback and with firm performances across Energy, Basic Resources, and Banks – the current sectoral outperformers. An interesting dynamic to be aware of: JP Morgan recommends going overweight on UK stocks alongside global cyclicals (and parts of EMs such as Brazil) due to the expected spillover effect from China’s stimulus and recent intervention. Delving deeper into sectors, Tech and Travel & Leisure currently post the deepest losses, with the former pulling back from last week’s outperformance and the latter weighed on by the ongoing COVID situation, higher fuel prices, and with eyes on the aforementioned Boeing story. Individual movers are largely dictated by the macro narrative. Nonetheless, Antofagasta (+4.0%) sees a boost from reports that the Co. is reportedly mulling exiting its Pakistani copper and mining project, with some USD 900mln seen for its 50% stake.

21 Mar 2022 - 09:42- EquitiesGeopolitical- Source: Newsquawk