EUROPEAN EQUITY OPEN: Indices start the week with gains, but Turkey proxies under pressure as Presidential elections go to runoff vote

OVERNIGHT: On Wall Street, stocks were lower on Friday amid inflation and consumer concerns post-Michigan survey and debt limit agitation, albeit indices closed off lows. Our US market wrap is here. Asia-Pac stocks traded mixed following the subdued performance last Friday on Wall St where risk sentiment was hampered by a disappointing University of Michigan Survey and US debt ceiling concerns, while participants in the region brace for this week’s key economic releases including the latest Chinese activity data. Our APAC wrap is here.

EUROPEAN OPEN: European equities start the week on a constructive footing, shrugging-off continuing angst around the looming US debt ceiling, as well as a run-off in Turkey’s Presidential elections, where neither the incumbent Erdogan or the oppositions Kilicdoroglu secured 50% of the vote. Data out of Germany showed wholesale prices falling 0.4% M/M, taking the annual rate to -0.5% Y/Y (prev. +2.0%). Over the weekend, ECB's de Guindos suggested that the cycle of rate hikes are in their final stretch, as a few of his colleagues did last week. ECB's Kazmir, however, leaned back against some of the more dovish chatter in recent days, stating that the central bank would need to raise rates for longer than previously thought in order to cap inflation.

STOCK SPECIFICS: In board room news, British American Tobacco (BATS LN) board appoints of Tadeu Marroco as CEO, succeeding Jack Bowles. In M&A, Apollo does not intent to make an offer for Wood Group (WD/ LN). Outgoing SocGen (GLE FP) chief said European banks were fundamentally safer than US counterparts due to strong regulation. For UK financials, regulators are reportedly looking into ways to reduce the burden on banks when new international capital rules are implemented in 2025. AXA (CS FP) sales rose amid higher demand for property policies. In energy, TotalEnergies (TTE FP) will strengthen its presence in Suriname. In industrials, Rolls-Royce (RR/ LN) CEO said it will not divest any core units in its strategy review, reiterated that it was underperforming vs peers. Lufthansa (LHA GY) CFO cautions against a quick turnaround for ITA Airways. Our full European equity briefings for May 15th can be accessed here and here.

US DEBT CEILING: The US Treasury Friday said there was USD 88bln in extraordinary measures to use under its 34.1trln debt limit; that figure is down from USD 110bln in the previous week. Last week, a meeting between President Biden and Congressional leaders failed to break the impasse, but Biden thinks further talks will take place on Tuesday, and he said he remained optimistic on talks. Biden said talks were moving along, and we will know more about progress in the next couple of days. Deputy Treasury Secretary Adeyemo added that ongoing debt-ceiling negotiations were constructive between all parties, CNN said. The FT said the White House and Republicans were starting to shape a possible debt ceiling deal, with issues on the table narrowing, although any agreement was unlikely to be concluded before President Biden attends the G7 summit between May 19th-21st, but could take place after that. Washington Post reports that markets are not expecting a US default, but some companies are preparing; by selling short-term Treasury bills and corporate bonds maturing around the June 1st, when the government might run out of cash, and buying safer money market funds even though they pay a lower return, in order to cover payrolls.

DAY AHEAD:

• Our full interactive day ahead calendar can be accessed here, a pdf version can be accessed here.


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  EURO: Eurozone industrial production is seen easing in March by 1.8% M/M. BoE’s chief economist Pill will speak on the rising cost of living and current economic conditions in remarks scheduled for after the European close. On the supply front, the BoE will hold a medium-term Gilt sale, while the DMO will sell 40yr debt via syndication. There is also a Eurogroup Meeting taking place today.


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  US: The US Day Ahead sees the release of the Empire Fed manufacturing survey, which will give us an early indication of what the May regional Fed manufacturing surveys may look like, and by extension, will help shape expectations for what the May ISM data will look like. March TIC flow data is due on the closing bell. On the speaker’s slate, Fed’s Bostic (2024) will speak on ‘Old Challenges in New Clothes’, Fed’s Barkin (2024) will be at the same event; after the close, Fed’s Cook (voter) will speak at Berkeley.


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  EARNINGS: The corporate earnings docket is thin today, with only Catalent (CTLT) of note; our daily earnings expectations can be accessed here. In the week ahead, numbers are due from HD on Tuesday; On Wednesday, TGT, TJX, CSCO, SNPS report; On Thursday, BABA, WMT, AMAT will report; and on Friday, DE will publish its earnings report; our full weekly earnings expectations are here.


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  WEEK AHEAD: This week, highlights include US retail sales, China activity data, Japan CPI, jobs data from UK and Australia; our week ahead preview can be accessed here.

15 May 2023 - 08:10- EquitiesData- Source: Newsquawk